Chapter 13

1. What financial statements are affected by an error in the ending inventory?

2. What is the main difference between the periodic and the perpetual system of accounting for inventory?

3. In a period of rising prices, which inventory method will result in:

a. the highest cost of goods sold?

b. the lowest cost of goods sold?

c. the highest ending inventory?

d. the lowest ending inventory?

4. Which inventory method always follows the actual physical flow of merchandise?

5. List the three steps followed under the gross profit method of estimating inventory

6. List the five steps followed under the retail method of estimating inventory