When a Periodic Inventory System Is Used

question 127

Multiple Choice

When a periodic inventory system is used:

• A) Cost of goods sold is a residual amount.
• B) Ending inventory is transferred to expense and the beginning inventory is transferred to assets.
• C) Two entries must be made when goods are purchased.
• D) A purchases account is not used; all inventory purchase entries are debits to the inventory account.

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Definitions:

Vertical Contracts

Agreements between firms at different levels of the supply chain, such as between a manufacturer and a retailer.

Costly Activities

Actions or tasks that require significant expenditure of resources, such as time, money, or effort.

Extended Inventory

An expanded list of goods and materials kept on hand by a business, including raw materials, work-in-progress, and finished goods.

Decrease Retailer Prices

A strategy where retailers lower the prices of goods or services, potentially to increase sales volume or clear inventory.