Right answers, thank you! Name Date: 1. A perpetual inventory system is an effec
ID: 2523356 • Letter: R
Question
Right answers, thank you! Name Date: 1. A perpetual inventory system is an effective means of control over inventory a. True b. False 2. When using the FIFO inventory costing method, the most recent costs are assigned to the cost of goods sold. a. True b. False 3. Assume that three identical units of merchandise were purchased during October, as follows: Units Purchase Purchase Purchase Cost $5 13 12 28 S33 Total Assume one unit is sold on October 31 for $28: I.Determine cost of goods sold and gross profit, under the LIFO method. 2.Record the sales using the perpetual inventory system. October 31 $28 Cost of goods sold S18 5. Three identical units of merchandise were purchased during July, as follows: Product Basic H Purchase Purchase Purchase Total Date Units Cost s 35 July 3 10 24 $10 Av
Explanation / Answer
1) True
Under perpetual system, continual updates to either the general ledger or inventory journal as inventory-related transactions occur. under a periodic inventory system, there is no cost of goods sold account entry at all in an accounting period until such time as there is a physical count, which is then used to derive the cost of goods sold.
2) True
Under FIFO valuation method assets produced or acquired first are sold, used or disposed of first.
3) LIFO method
Cost of Good sold - Under LIFO good which was purchased last is used first hence COGS is 15
Profit - Sales - Cost of Good sold
=28-15
=13
4) Average cost per unit
Total cost for 3 unit =108
Average cost = 108/3
Average Cost = 36
FIFO
Sales - 45
COGS - 35 (First purchase)
Gross profit - 10
Inventory - Total purchase -COGS
=108-35
=73
LIFO
Sales - 45
COGS - 37 (last purchase)
Gross profit - 8
Inventory - Total purchase -COGS
=108-37
=71
Average cost
Sales - 45
COGS - 36 (Average cost of purchase)
Gross profit - 9
Inventory - Total purchase -COGS
=108-36
=72
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