Some Companies That Use a Perpetual Inventory System and the Weighted

question 121

Multiple Choice

Some companies that use a perpetual inventory system and the weighted average cost flow assumption restate their inventories at year-end to the amount indicated by periodic weighted average cost procedures. The primary reason for this adjustment is that:

• A) Periodic weighted average cost often results in a higher valuation of inventory, thus reducing taxable income.
• B) This adjustment is necessary to record shrinkage losses.
• C) Periodic weighted average cost often results in a lower valuation of inventory, thus reducing taxable income.
• D) Periodic and perpetual costing procedures produce the same results if the year-end inventory has been counted properly. No adjustment would be needed.