Reference no: EM132708732

Problem 1: In a periodic inventory system, if the beginning inventory is overstated

a) net income is understated.

b) current ratio is overstated.

c) cost of goods sold is understated.

Problem 2: In a periodic inventory system, if ending inventory is understated,

a) net income is understated.

b) working capital is overstated.

c)the current ratio is overstated.

d) cost of goods sold is understated.

Problem 3: Which of the following does NOT correctly describe a perpetual inventory system?

a) Cost of goods sold is calculated every time a sale is made.

b) Assuming shrinkage of zero, inventory and cost of goods sold do not have to be updated at the end of the period.

c) The use of this system eliminates the requirement for an annual physical inventory count.

d) Assuming a FIFO cost flow, cost of goods sold would equal that calculated by the periodic system.