Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

There are two systems to keep track of inventory: the perpetual system and the periodic system.

Concept: Cost of Goods Sold: Perpetual Inventory

4m

Concept: Cost of Goods Sold: Periodic Inventory

6m

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory Additional Practice Problems

Cost of Goods Sold is classified as which type of account?

a. asset

b. liability

c. revenue

d. expense

Watch Solution

XYZ reports the following information:

Beginning inventory: $1,500

Ending Inventory: $2,200

Purchases $3,000

Purchase returns $500

Sales returns $1,500

Sales discounts $200

Freight In: $250

Freight Out: $300

What is XYZ Company’s Cost of Goods Sold for the year?

a. $1,800

b. $2,050

c. $2,350

d. $6,450

Watch Solution

Write journal entries (in good form using debits and credits) for the following transactions and facts applying to January 2008:

i. On January 2nd , 2008 Campus T-Shirt collected $5,000 in cash from a large department store for a purchase made by that department store back in December of 2007.

ii. Campus T-Shirt purchased $8,000 in additional supplies on January 7th , 2008. The supplies will be used over the next few months. Campus paid $4,000 in cash and promised to pay the remainder in 30 days.

iii.  On January 13 th , Campus T-Shirt sold 10 shirts for $10 each to an individual who paid cash. The cost of the shirts to Campus T-Shirt was $5.00 per shirt.

iv.  On January 15 th , Campus T-Shirt paid its employees the wages payable from the beginning of the year and $15,000 in additional wages for work performed during January 2008.

Watch Solution

At the beginning of September, 2015, Kani Company reported Merchandise Inventory of $4,000. During the month, the company made purchases of $7,800. At September 31, 2015, a physical count of inventory reported $3,200 on hand. Cost of goods sold for the month is

a. $600.

b. $7,800.

c. $8,600.

d. $11,800

Watch Solution

In a perpetual inventory system, two entries are normally made to record each sales transaction. The purpose of these entries is best described as follows: 

a. One entry recognizes the sales revenue and the other recognizes the cost of goods sold.

b. One entry records the purchase of merchandise and the other records the sale.

c. One entry records the cost of goods sold and the other reduces the balance in the Inventory account.

e. One entry updates the subsidiary ledger and the other updates the general ledger.

Watch Solution

In a periodic inventory system, one entry usually is made to record each sales transaction. The purpose of this entry are best described as follows:

a. The entry recognizes the sales revenue

b. The entry records the reduction of inventory

c. The entry records the cost of goods sold

e. The entry updates the subsidiary ledger.

Watch Solution

The SD Company makes the following entry in its accounting records:

Cost of Goods Sold                                 275
     Inventory                                                    275

This entry would be made when merchandise is

a. sold and the periodic inventory method is used.

b. sold and the perpetual inventory method is used.

c. purchased and the perpetual inventory method is used.

d. purchased and the periodic inventory method is used.

Watch Solution