A Company Using the Periodic Inventory System Has the Following

question 57

Multiple Choice

A company using the periodic inventory system has the following account balances: Inventory at the beginning of the year, $3,600; Freight In, $650; Purchases, $10,700; Purchases Returns and Allowances, $1,950; Purchases Discounts, $330. The cost of merchandise purchased is equal to

• A) $12,670
• B) $9,070
• C) $8,420
• D) $17,230

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Definitions:

Law of Diminishing Marginal Utility

The Law of Diminishing Marginal Utility states that as a person consumes more of a product, the satisfaction (utility) gained from consuming each additional unit decreases.

Slope Downward

A graphical representation indicating a decrease or decline in a variable as another variable increases, common in supply and demand curves.

Coase Theorem

A principle in economics that suggests that if property rights are well-defined and trade is possible without cost, parties can negotiate to resolve externalities or conflicts over resource allocation efficiently themselves.

Optimal Allocation

The most efficient distribution of resources and efforts among various possible tasks or uses to maximize desired outcomes or objectives.