Asked by Jackie Fortner on Jun 07, 2024
Verified
When the perpetual inventory system is used, the inventory sold is shown on the income statement as
A) cost of merchandise sold
B) purchases
C) purchases returns and allowances
D) net purchases
Perpetual Inventory System
An accounting method that records inventory purchases or sales in real-time through the use of computerized point-of-sale systems and enterprise asset management software.
Cost of Merchandise Sold
The total cost incurred by a company to sell goods during a specific period, including purchase and direct labor costs.
- Understand the significance of the cost of goods sold and how it is calculated using both perpetual and periodic inventory systems.
Verified Answer
1J
16jtarver@somervilleschools.org Jtarver3Jun 14, 2024
Final Answer :
A
Explanation :
When the perpetual inventory system is used, the cost of merchandise sold is recorded as the items are sold, and therefore, is the correct option to show on the income statement. Purchases, purchases returns and allowances, and net purchases are all part of the calculation of cost of merchandise sold, but are not directly shown on the income statement.
Learning Objectives
- Understand the significance of the cost of goods sold and how it is calculated using both perpetual and periodic inventory systems.