Question

1. In a perpetual inventory​ system, multiple performance obligations​ _________.

A.

may require the creation of an asset​ account, Unearned Revenue

B.

require the company to allocate the transaction price to each performance obligation

C.

result in revenue being recorded when the separate performance obligations are identified because there is a binding contact

D.

represent one distinct performance obligation

Answer 1

Question 1:-

In a perpetual inventory system, multiple performance obligations , The correct answer is Option B - Require the company to allocate the transaction price to each performance obligation. When a company follows the perpetual inventory system, the company maintains a real time record of goods bought and sold . This means, after each purchase or sale transaction , the company will allocate the price to the inventory after each performance obligation to ensure that the cost of the inventory is updated and latest.

Option A is incorrect . This statement is not true as Unearned revenue is not required to be created.

Option C is incorrect as this statement is not true for a perpetual inventory system.

Option D is incorrect. A perpetual inventory system merely represents maintaining the inventory of a company on a real time basis by recording the purchases and sales of the inventory after each and every transaction. There is no distinct performance obligation and as such is incorrect.