Under the Perpetual Inventory System, the Best Estimate of the Amount

question 113

Multiple Choice

Under the perpetual inventory system, the best estimate of the amount of inventory is:

• A)shown on the previous period's financial statements.
• B)provided by application of the gross margin method.
• C)the book balance in the inventory account.
• D)the beginning inventory balance minus sales for the perioD.In a perpetual inventory system, the balance in the inventory general ledger account should provide the best estimate of inventory on hand. The gross margin method should only be used if a book inventory and a physical inventory are unavailable.

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Definitions:

Shareholders

Individuals or entities that own shares in a corporation, giving them ownership interests and potentially the right to vote on corporate matters.

Board of Directors

A group of individuals elected by the shareholders of a company to oversee and make decisions on major issues and policies.

Primary Market

The market where securities are issued for the first time, allowing corporations to raise capital from investors.

Securities

Marketable securities embodying equity in publicly-operated corporations, claims of debt owed by governments or firms through bonds, or opportunities for ownership via options.