ACC 250 Lecture Notes - Lecture 10: Data Entry Clerk, Perpetual Inventory, Computer File

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Perpetual Inventory

There are many businesses for which the periodic inventory system is not adequate.

Competition forces them to use the perpetual inventory system, which provides up to the

minute information about the company’s stock. This is information that would not be

possible if the periodic inventory system were used.

How it Works

The perpetual inventory system is one in which a detailed record of items in stock is kept up

to date on an ongoing basis. Not many years ago, this was possible for only a few businesses.

It took many employees at considerable cost to produce the information on a card file.

Additions to the inventory were made from copies of receiving reports, which represented

goods coming into the plant. Deductions from the inventory were made from copies of

shipping orders, which represented goods going out of the plant.

Today, computers are able to do the work far more effectively at a reasonable cost. With a

computer system, the inventory records are kept in a computer file. The system is organized

numerically with each item being given a unique code. As goods are received from suppliers,

receiving reports are made out. Copies of these reports are then sent to the data entry clerk,

who enters the items into the inventory. If purchased goods are returned, the appropriate

deductions from inventory are made.

The more technically complex part of the system happens in respect to sales. For example, in

a store, each cash register is a point of sale terminal connected to the store’s main computer.

As items are sold, the cashier’s duties include entering the code numbers and the quantities

sold via the cash register keyboard or by means of an electronic scanner. The information is

transferred directly of the store’s central computer, which is programmed to make the

appropriate deductions from the inventory and to make the accounting entries.

Sales returns are generally handled by a separate department, usually the customer service

department.

As good as the system is, it doesn’t automatically know when goods are lost, stolen, or

broken. Therefore, a manual check of the inventory is required. This is stolen, or broken.

Therefore, a manual check of the inventory is required. This is usually carried out on a

random basis throughout the year. The quantity of individual items on hand is counted and

compared with the book inventory shown by the computer. Any differences are adjusted to

agree with the quantity counted manually.

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Document Summary

There are many businesses for which the periodic inventory system is not adequate. Competition forces them to use the perpetual inventory system, which provides up to the minute information about the company"s stock. This is information that would not be possible if the periodic inventory system were used. The perpetual inventory system is one in which a detailed record of items in stock is kept up to date on an ongoing basis. Not many years ago, this was possible for only a few businesses. It took many employees at considerable cost to produce the information on a card file. Additions to the inventory were made from copies of receiving reports, which represented goods coming into the plant. Deductions from the inventory were made from copies of shipping orders, which represented goods going out of the plant. Today, computers are able to do the work far more effectively at a reasonable cost.

Related Questions

17 accounting 1 questions! HELP

9. The following amounts and costs of platters were availablefor sale by Corpus Christy Ceramics during 2016:

Beginning inventory	10 units at $41
First purchase	15 units at $55
Second purchase	30 units at $70
Third purchase	25 units at $65

Corpus Christy Ceramics has 35 platters on hand at the end ofthe year.

What is the dollar amount of inventory at the end of the yearaccording to the weighted-average cost method?

Select one:

A. $4,340

B. $9,920

C. $3,465

D. $6,200

32. Santa Fe Corporation uses the perpetual inventory method. OnMarch 1, it purchased $60,000 of merchandise inventory, terms 2/10,n/30. On March 3, Santa Fe returned goods (not damaged) that cost$6,000. On March 9, Santa Fe paid the supplier.

On March 9, Santa Fe should credit:

Select one:

A. Purchase discounts for $1,200

B. Purchase discounts for $1,080

C. Inventory for $1,080

D. Inventory for $1,200

33. Rocky Company has beginning equity of $600,000, net incomeof $100,000, dividends of $60,000 and investments by owners inexchange for stock of $20,000. Its ending equity is:

Select one:

A. $660,000

B. $480,000

C. $536,000

D. $446,000

35. On September 1, 2016, Chopper, Inc. reported RetainedEarnings of $272,000. During the month of September, Choppergenerated revenues of $40,000, incurred expenses of $24,000,purchased equipment for $10,000 and paid dividends of $12,000.

What is the balance in Retained Earnings on September 30,2016?

Select one:

A. $272,000 debit

B. $276,000 credit

C. $ 16,000 credit

D. $274,000 credit

36. Savannah Company purchases $120,000 of inventory during theperiod and sells $36,000 of it for $60,000. Beginning of the periodinventory was $6,000.

What is the companyâs inventory balance to be reported on itsbalance sheet at year end?

Select one:

A. $36,000

B. $90,000

C. $ 4,000

D. $ 6,000

37. Assuming rising prices, which method will give the highestdollar value for cost of goods sold on the income statement?

Select one:

A. FIFO

B. Average Cost

C. LIFO

D. All of these give equal values for cost of goods sold

38. Kali Company began the period with $20,000 in inventory. Thecompany also purchased an additional $20,000 of inventory andreturned $2,000 for a full credit. A physical count of theinventory at yearâend revealed an inventory on hand of $16,000.What was Kaliâs cost of goods sold for the period?

Select one:

a. $50,000

b. $22,000

c. $48,000

d. $16,000

39. The periodic inventory system differs from the perpetualinventory system:

Select one:

because the periodic system is not compatible with moderntechnology.

because the periodic system continually updates inventory, whilethe perpetual inventory system only updates inventory at the end ofthe period.

because the perpetual system continually updates inventory,while the periodic inventory system only updates inventory at theend of the period.

because the periodic system is more complex and costly.

40. Which one of the following is included in currentassets?

Select one:

A. Common stock

B. Accounts receivable

C. Taxes payable

D. Automobiles

41. For the balance sheet to be in balance, the following mustexist:

Select one:

Total assets must be less than total liabilities

Total assets must be greater than total liabilities

Total assets must equal total liabilities plus stockholders'equity

Total liabilities must equal total stockholders' equity

43. Using a perpetual inventory system, the buyerâs journalentry to record the freight costs includes a:

Select one:

A. Debit to Purchases

B. Debit to Inventory

C. Debit to Freight In

D. Debit to Cost of Goods Sold

44. Joshua records purchases at invoice price and uses theperpetual inventory system. On July 5, Joshua returned $6,000 ofgoods purchased on account to the seller.

How would Joshua record this transaction?

Select one:

Accounts Payable		6,000
	Purchases		6,000

Accounts Receivable		6,000
	Inventory		6,000

Accounts Payable		6,000
	Inventory		6,000

Cash		6,000
	Purchases		6,000

45. Smith & Sons purchased $5,000 of merchandise from theClaremont Company with terms of 3/10, n/30. How much discount isSmith & Sons entitled to take if it pays within the alloweddiscount period of 10 days?

Select one:

$100

$50

$300

$150

46. The accounting record for Max III Company reported thefollowing selected information:

Operating Expenses	$180,000
Sales Returns and Allowances	52,000
Sales Discounts	24,000
Sales Revenue	700,000
Cost of Goods Sold	268,000

Determine Max III Company's gross profit.

Select one:

A. $332,000

B. $280,000

C. $308,000

D. $356,000

48. Using a a perpetual inventory system, the sellerâs journalentry to record the payment for merchandise, received from thebuyer, within the discount period includes a:

Select one:

A. Debit to Accounts Receivable

B. Debit to Cost of Goods Sold

C. Credit to Sales Discounts

D. Debit to Sales Discounts

49.Geraldoâs Groceries purchased milk cartons at an invoiceprice of $6,000 and terms of 2/10, n/30. On arrival of the goods,Geraldoâs realized that half of the milk was past the expirationdate, and returned them immediately to the supplier.

If Geraldoâs pays the remaining amount of the invoice within thediscount period, the amount paid should be:

Select one:

A. $2,880

B. $5,880

C. $2,940

D. $6,000

50. Which one of the following is not a current liability?

Select one:

A. Wages payable

B. Accounts payable

C. Wage expense

D. Taxes payable

rubymacaw554

12 ACCOUNTING QUESTIONS

4. Using a perpetual inventory system, the buyer'sjournal entry to record the return of merchandise purchased onaccount includes a:

Select one:

A. Credit to Cost of Goods Sold

B. Credit to Accounts Payable

C. Credit to Purchase Returns

D. Credit to Inventory

6.Using a perpetual inventory system, the buyerâsjournal entry to record the payment for merchandise within thediscount period includes a:

Select one:

A. Debit to Accounts Payable

B. Debit to Cost of Goods Sold

C. Debit to Purchases

D. Debit to Inventory

7.Which of the following statements regarding cost flows istrue?

Select one:

Cost of goods available for sale is equal to beginning inventoryminus cost of goods purchased.

CGAS = beginning inventory minus ending inventory.

Cost of goods available for sale is equal to beginning inventoryplus cost of goods purchased.

CGAS = cost of goods sold minus cost of goods purchased.

10. Using a perpetual inventory system, the buyerâsjournal entry to record the purchase of merchandise on creditincludes a:

Select one:

A. Debit to Inventory

B. Debit to Freight In

C. Debit to Cost of Goods Sold

D. Debit to Purchases

11. Which of the following is not shown in thestatement of stockholder's equity?

Select one:

A. Unearned revenue

B. Common stock

C. Retained earnings

D. Dividends

13. Using a perpetual inventory system, the sellerâsjournal entry to record the sale of merchandise on account includesa:

Select one:

A. Debit to Accounts Receivable

B. Credit to Cost of Goods Sold

C. Credit to Purchases

D. Debit to Inventory

14. A merchandising company's multi-step income statementdiffers from that of a service company in what way?

Select one:

A service company does not include a line for cost of goodssold.

A service company has a line for selling expenses whereas amerchandising company does not.

There is no difference.

A merchandising company will have a line for income fromoperations whereas a service company will not.

16.Using a perpetual inventory system, the sellerâs journalentry to record the return, by the buyer, of merchandise purchasedon account includes a:

Select one:

A. Credit to Purchase Returns

B. Debit to Cost of Goods Sold

C. Debit to Accounts Receivable

D. Debit to Sales and Allowances

20. For a firm that uses the perpetual inventory system, theSales Returns and Allowances account:

Select one:

A. Is not a contra account

B. Is not used

C. Is debited by the firm receiving returned goods from acustomer

D. Has a normal credit balance

21. Current assets are cash and other assets that will beconverted into cash or used up within:

Select one:

A. One year

B. The normal operating cycle of the business

C. The normal operating cycle of the business or one year,whichever is longer

D. The normal operating cycle of the business or one year,whichever is shorter

22. The balance sheet format that reports assets first and then,beneath the assets, reports the liabilities and stockholders'equity is called the:

Select one:

A. Account form

B. Report form

C. Stack form

D. Classified form

23. Safari Monkey Company sold $2,400,000 worth of merchandise,had $200,000 returned, and then the balance was received during the2% discount period.

What were the companyâs net sales?

Select one:

A. $1,800,000

B. $1,760,000

C. $2,156,000

D. $2,040,000

turquoisesea-lion93

I accidentally did the chapter 6 serial problem instead of thisworksheet, and it is due today... Please, please, please, help. Iam a good 4.0 student that simply made an idiotic mistake. Thanksin advance for any help.

During January, acompany that uses a perpetual inventory system had beginninginventory, purchases, and sales as follows:
Units Unit cost

Beggininginventory 100 10

Jan 5purchased 40 12

Jan 10sold 60

Jan 15purchased 70 13

Jan 25sold 50

** The selling priceper unit is $20.

1. Using theperpetual inventory system, calculate thetotal cost of goods sold for January and cost of the company'sJanuary 31^st inventory for the followingmethods. Show all your work using the formatused in the text!

a) FIFO

b) LIFO

c) Weighted average

d) Prepare journal entries for the events listed in thequestion using the amounts calculated using in (a) FIFOmethod.

2. Using theperiodic inventory system, calculate the costof goods sold for January and cost of the company's January31^st inventory for the followingmethods. Show all your work usingthe format provided in the appendix of the chapter in thetext!

a) FIFO

b) LIFO

c) Weighted average

3. A company madethe following purchases during the year:

Jan 10: 15 units @360 each

Mar 25: 25 units@390 each

April 25: 10 units@ 420 each

July 30: 20 units @450 each

Oct 10: 15 units @480 each

On December 31,there were 28 units in ending inventory. These 28 units consistedof 1 from the January 10 purchase, 2 from the March 15 purchase, 5from the April 25 purchase, 15 from the July 30 purchase, and 5from the October 10 purchase. Using perpetual inventory system,calculate the cost goods sold and ending inventory for the yearusing the specific identification method.Show all your work using the format providedin the text! (Note: Answers do not differusing the periodic inventory system)

4. Monitor Companyuses the LIFO method for valuing its ending inventory. Thefollowing financial statement information is available for itsfirst year of operation:

Income Statement

For the year endedDec 31

Sales 50,0000

Cost of goodssold 23,000

Grossprofit 27,000

Expenses 13,000

Income beforetaxes 14,000

Monitor's endinginventory using the LIFO method was $8,200. Monitor's accountantdetermined that, had the company used FIFO, the ending inventorywould have been $8,500.

a) Determine what the income beforetaxes would have been, had Monitor used the FIFO method ofinventory valuation instead of LIFO.

b) Whatwould be the difference in income taxes between LIFO and FIFO,assuming a 30% tax rate?

c) IfMonitor wanted to lower the amount ofincome taxes to be paid, which method would itchoose?

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ACC 250 Lecture Notes - Lecture 10: Data Entry Clerk, Perpetual Inventory, Computer File

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