A perpetual inventory system is most often used when:

• Inventory has a small number of items with relatively high value
• Inventory has a small number of items with relatively low value
• Inventory has a large number of items with relatively high value
• Inventory has a large number of items with relatively low value

A periodic inventory system is most often used when:

• Inventory has a large number of items with relatively high value
• Inventory has a small number of items with relatively high value
• Inventory has a small number of items with relatively low value
• Inventory has a large number of items with relatively low value

The perpetual method of accounting for inventory:

• Is not as helpful as a periodic method in providing management with timely reports about inventory quantities and costs
• Is likely to be less expensive to maintain than a periodic inventory method
• Allows management to better estimate inventory losses from pilferage than does a periodic inventory method
• Requires that a physical count of inventory be taken before the cost of goods sold can be determined with any reasonable degree of accuracy

If a company sold merchandise for a profit, the accounting equation would show a(n):

• Net increase in assets and decrease in liabilities
• Net decrease in assets and increase in revenues
• Net increase in assets and increase in revenues
• Increase in liabilities and increase in revenues

With a periodic inventory system, inventory-related data can be used to compute an estimate of what ending inventory should be before an ending inventory count is made. What is the correct calculation of this estimate of ending inventory?

• Cost of goods sold plus purchases
• Cost of goods sold plus cost of goods available for sale
• Cost of goods sold minus beginning inventory
• Purchases plus beginning inventory
• Cost of goods available for sale minus cost of goods sold
• Cost of goods available for sale plus purchases

For external reporting purposes, inventory shrinkage is usually combined with which account?

• Operating expenses
• Gross profit
• Cost of goods sold
• Merchandise inventory

A physical count would be necessary at the end of the accounting period under which inventory system?

• Both periodic and perpetual inventory systems
• Neither periodic nor perpetual inventory systems
• Perpetual inventory system
• Periodic inventory system

Under which inventory system would a company NOT be able to specifically determine the amount of inventory lost or stolen?

• Neither periodic nor perpetual inventory systems
• Periodic inventory system
• Both periodic and perpetual inventory systems
• Perpetual inventory system

If expenses are overstated on the income statement, net income:

• Will be unaffected
• Will be understated
• Will be overstated
• Cannot be determined from the information given

If the ending inventory is overstated, net income for the same period will be:

• Unaffected
• Understated
• Overstated
• Cannot be determined from the information given