Question

What is the difference in reporting requirements for customer-returned merchandise in sellable condition under a perpetual inventory system versus a periodic inventory system?

a) Perpetual system requires immediate reporting, while periodic system delays reporting until year-end.
b) Perpetual system delays reporting until year-end, while periodic system requires immediate reporting.
c) Both systems have the same reporting requirements.
d) There are no reporting requirements for customer-returned merchandise.

Answer 1

In perpetual inventory systems, customer-returned merchandise in sellable condition must be reported immediately, whereas in periodic inventory systems, the reporting is delayed until the inventory count at the end of the period.

Step-by-step explanation:

The difference in reporting requirements for customer-returned merchandise in sellable condition under a perpetual inventory system versus a periodic inventory system is that in the perpetual system, the return is recorded immediately as an increase in inventory and a decrease in cost of goods sold. Meanwhile, in a periodic system, returns are not recorded immediately but are instead accounted for at the end of the period when a physical inventory count is done. In simpler terms, the correct answer to the student's question is: a) Perpetual system requires immediate reporting, while periodic system delays reporting until year-end.