If a Perpetual Inventory System Is Used Instead of a Periodic

question 98

Multiple Choice

If a perpetual inventory system is used instead of a periodic system, identify the accounts that the
Merchandise Inventory account replaces.

• A)Purchases, Sales, Freight In
• B)Purchases, Cost of Goods Sold
• C)Purchases, Accounts Receivable, Freight In
• D)Purchases, Purchase Returns and Allowances, Freight In

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Definitions:

Shareholders Agreement

A contract among the shareholders of a company detailing their rights, obligations, and the management of the company.

Salomon v. Salomon

A foundational company law case from the UK, establishing the principle that a corporation has a separate legal personality, distinct from its shareholders.

Secured Creditor

A creditor that has a legal claim, or lien, on collateral that secures loan repayment.

Legal Entity

An organization or individual with legal rights and obligations, like a corporation or partnership.