When a Company Uses a Perpetual Inventory System

question 114

Multiple Choice

When a company uses a perpetual inventory system,

• A) there is no purchases account
• B) the cost of goods sold account is used
• C) two entries are required when inventory is sold
• D) all of these

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Definitions:

Semiannually

Occurring twice a year or every six months.

Bond Premium

The amount by which the market value of a bond exceeds its principal amount or par value, typically occurring when the bond's interest rate is higher than current market rates.

Straight-Line Method

A depreciation method that allocates an equal portion of the cost of a fixed asset to each accounting period over its useful life.

Amortization

The process of gradually reducing the cost of an intangible asset through scheduled periodic payments over its useful life.