Under the perpetual inventory system, when a company makes a sale, when must the

Question

Under the perpetual inventory system, when a company makes a sale, when must they update inventory? Only at the end of the period a. b. At the end of the year At each Sale Only at the end of the accounting cycle c. d. 8) Under a period of Falling Purchase Prices, which inventory system will provide a company with the lowest Net Income? a. FIFO b. LIFO c. Average Cost d. Specific Identification 9) Shug Jordan Co Reported ending inventory of $1000. After examination, they found out that their ending inventory was understated by $210. What is the effect of this error on the company's net income in the current period? a. Net Income will be correct b. Net Income will be overstated by $210 c. Net income will be unaffected d. Net Income will be understated by $210

Explanation / Answer

7) In perpetual inventory system inventory is updated on every purchase and sale. but in periodic method inventory is updated only end of period.

so answer is c) At each sale

8) In FIFO method give highest cost of goods sold and lowest net income if purchase price is falling.

so answer is a) FIFO

9) Ending inventory is understated by $210 it means cost of goods sold is overstated by $210 cost of goods sold is overstated means net income will understated.

so answer is d) Net income will be understated by $210

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