A Company Uses the Perpetual Inventory System

question 20

Multiple Choice

A company uses the perpetual inventory system.The inventory account balance is $50,000.An actual count of inventory reveals that actual inventory is $43,000.Which of the following would be included in the required adjusting entry?

• A) A $43,000 credit to Inventory would be required.
• B) A $50,000 debit to Cost of goods sold would be required.
• C) A $7,000 credit to Cost of goods sold would be required.
• D) A $7,000 credit to Inventory would be required.

---

Definitions:

Process Costing

An accounting methodology used for homogeneous products, where the cost of the product is calculated by averaging the total production costs over the total units produced.

Weighted-Average Method

A cost accounting method that calculates the cost of goods sold and ending inventory on the basis of the average cost of all similar items in inventory, irrespective of purchase date.

Conversion Costs

Costs incurred to convert raw materials into finished products, including labor and overhead expenses.

Process Costing

A costing method used for homogeneous products that are produced in a continuous process, allocating costs to units of product based on the processes they undergo.