Perpetual Inventory System Solved Questions

I need the Perpetual Inventory System Solved Questions so please can you give me the questions and also give me the page where I can download the question free of cost?

[Pathak]

As you have required the Perpetual Inventory System Solved Questions here I am giving you it example with solution.
An organization with an inventory of five items is considering a change from a periodic to a perpetual inventory system.
Currently each item is ordered at the end of the month.
The ordering cost per item is Rs 10 per order, and the holding cost is 12 % per year.
The relevant item data are listed in table below.
Should the organization adopt a perpetual inventory system?
Item, i Annual Demand, Ri Unit Cost, Pi
1 600 3
2 900 10
3 2,400 5
4 12,000 5
5 18,000 1

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Hey, I want sample solved Question paper of the Perpetual Inventory System paper, will you provide me the sample solved paper ?

[Raman Vij]

As you want I am here providing you sample solved paper of the Perpetual Inventory System.

Sample Question - answer:

1. Define the term merchandise inventory.

The products that merchandising companies buy and sell are called merchandise inventory.


2. Identify three examples of merchandise inventory.

Food, clothing, textbooks, toys, automobiles, appliances, etc.


3. What is the major difference between merchandising and manufacturing?

Merchandising companies sell the products they purchase. Manufacturing companies take the products they purchase, combine them with other products to create different products, which they then sell.


4. Identify four major steps involved with merchandise inventory.

Step 1: purchase merchandise from suppliers.

Step 2: sell merchandise to customers.

Step 3: collect cash from customers.

Step 4: pay cash to suppliers.


5. What is the primary objective of the four merchandise inventory steps you identified in question 4?

The primary objective of merchandising companies is to increase their resources by charging customers more than it cost the companies to buy the products and get them to customers.


6. How is gross profit calculated?

Gross profit = net sales - cost of goods sold.


7. Why is gross profit important to merchandising companies?

Unless companies can charge customers more than it cost the companies to buy the products, it is virtually impossible for them to increase their resources through management activities.


8. State the formula for calculating gross profit percentage.

Gross profit percentage = gross profit / net sales.


9. How often are merchandise inventory records updated in a perpetual inventory system?

Perpetual inventory systems update inventory records constantly. Whenever a transaction occurs that changes merchandise, the perpetual inventory system updates the inventory records.


10. How does a perpetual inventory system differ from a periodic inventory system?

Periodic inventory systems update inventory records only at the end of an accounting period, while perpetual inventory systems update inventory records constantly. For practical purposes this means periodic inventory systems update inventory records at the end of each month, while perpetual inventory systems may update inventory records numerous times each day.


11. What is the reason merchandising companies inspect the merchandise they purchase?

Merchandise is inspected to make certain it is what the company ordered and is in good enough condition to be sold to customers.


12. What is the most important use merchandising companies make of their merchandise inventory?

Most merchandise inventory is sold to customers.


13. Why do merchandising companies maintain some merchandise inventory at the end of each accounting period?

Merchandising companies keep some inventory on hand at the end of each period in order to have merchandise available to be sold to customers at the beginning of the next period.


14. After a merchandising company purchases merchandise, what are the three most important actions the company can take with the merchandise?

Return it to suppliers.

Sell it to customers.

Keep it on hand to sell to customers next period.


15. After a merchandising company purchases merchandise, inspects it, and returns any unwanted items, what are the two most important actions the company can take with the remaining merchandise?

Sell it to customers.

Keep it on hand to sell to customers next period.


16. What is the relationship between a company's cost of goods sold and its ending merchandise inventory?

Merchandise available for sale - cost of goods sold = ending merchandise inventory.


17. Identify the name of the largest expense on the income statement of most merchandising companies.

Cost of goods sold.


18. What does a FIFO inventory system do with the first unit costs coming into a merchandising company?

FIFO assigns the first unit costs to the first units sold during the period.


19. What does a FIFO inventory system do with the last unit costs coming into a merchandising company?

FIFO assigns the last unit costs to the units remaining in inventory at the end of the period.


20. What does a LIFO inventory system do with the first unit costs that coming into a merchandising company?

LIFO assigns the first unit costs to the units remaining in inventory at the end of the period, which in a LIFO perpetual inventory system may be the end of a day rather than the end of a month.


21. What does a LIFO inventory system do with the last unit costs coming into a merchandising company?

LIFO assigns the last unit costs to the first units sold during the period.


22. What is the difference between tax planning and tax evasion?

Tax planning involves the legal choosing among accounting methods to minimize or postpone the payment of income taxes. Tax evasion is the illegal, willful violation of income tax laws.


23. In what section of the balance sheet is merchandise inventory reported?

Merchandise inventory is reported on the balance sheet as a current asset.


24. On which financial statement and in which section is the cost of goods sold reported?

The cost of goods sold is reported on the income statement in its own section immediately following net sales revenue.