Multiple Choice
If a company uses the perpetual inventory system and records a sale of inventory with variable costs of \$20 per unit, what is the correct journal entry to record the cost of goods sold at the time of sale?
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
Multiple Choice
Which inventory system provides a continuous record of inventory and cost of goods sold, updating these accounts after each purchase or sale?
A
Just-in-time inventory system
B
Perpetual inventory system
C
Periodic inventory system
D
Specific identification method
Verified step by step guidance1
Understand the key characteristics of each inventory system mentioned in the problem: Perpetual inventory system, Periodic inventory system, Just-in-time inventory system, and Specific identification method.
Learn that the Perpetual inventory system updates inventory and cost of goods sold accounts continuously after each purchase or sale, providing real-time tracking of inventory levels.
Contrast this with the Periodic inventory system, which updates inventory and cost of goods sold accounts only at the end of an accounting period, not after each transaction.
Recognize that the Just-in-time inventory system focuses on minimizing inventory levels by ordering goods only as needed, and does not inherently provide continuous updates to inventory records.
Understand that the Specific identification method tracks individual items of inventory and assigns costs based on the specific item sold, but it does not inherently provide continuous updates to inventory and cost of goods sold accounts like the Perpetual inventory system does.
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