In Comparing a Perpetual Inventory System with a Periodic Inventory

question 57

Multiple Choice

In comparing a perpetual inventory system with a periodic inventory system,which of the following statements is not correct?

• A)Most large companies use perpetual inventory systems.
• B)A periodic system does not include an inventory subsidiary ledger.
• C)The perpetual method is easier to apply in a manual accounting system.
• D)Regardless of the system in use,most businesses take a physical inventory at least once a year.

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Definitions:

Moral Hazard

A condition in which a person can benefit, usually financially, by acting unethically or immorally, i.e., the person is tempted to be less than honest and ethical. An insurance term. A moral hazard exists when executive compensation is heavily based on the market price of the company’s stock.

Arbitrage

The practice of taking advantage of price differences in different markets to make a profit.

Money Markets

Financial markets focused on short-term borrowing and lending with maturities of less than one year, dealing in instruments like Treasury bills and commercial paper.

Short-Term Debt

Borrowings that are due to be paid back within a short period, typically less than one year.