In a Perpetual Inventory System, an Inventory Flow Assumption Is

question 15

Multiple Choice

In a perpetual inventory system, an inventory flow assumption is used primarily for determining which costs to use in:

• A) Recording purchases of inventory.
• B) Recording the cost of goods sold.
• C) Recording sales revenue.
• D) Forecasts of future operating results.

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Definitions:

Accumulated Depreciation

The total depreciation that has been recorded against an asset over its useful life, representing the reduction in value of the asset.

Cost Model

An accounting method that values an asset based on its historical cost less any accumulated depreciation and impairment losses.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against a fixed asset since it was put into use.

Recoverable Amount Test

A financial assessment to determine the higher of an asset's fair value less costs of disposal and its value in use.