Chapter 4, Problem 8E

To determine

T-Account:

It is a graphic presentation of general ledger account. This account is fundamental training tool in double entry book keeping. Debit entries are shown on the left side of T-account and credits are shown to the right side of T-account.

Merchandise Inventory:

It means the materials or goods held by a business for the purpose of resale. It includes raw materials, work-in-progress and finished goods. It is reported as an asset in the asset side.

Perpetual inventory system:

It is an inventory system wherein accounts related to inventory are updated on each purchase and sale activity. Quantities of inventory are updated on continuous basis. This can be done by integrating the inventory system to order entry and to the retail sale point of system.

Cost of goods sold:

Cost of goods sold means the direct cost incurred in the production of goods. It involves labor cost, material cost, direct factory overheads. The purpose of finding the COGS is to compute the “true cost” of goods sold. It supports the management in monitoring the purchase cost of inventory.