Inventory: Inventory refers to the stock or goods which will be sold in the near future and thus is an asset for the company. It comprises of the raw materials which are yet to be processed, the stock which is still going through the process of production and it also includes completed products that are ready for sale. Thus inventory is the biggest and the important source of income and profit for the business. Perpetual Inventory System: In perpetual inventory system, there is a continuous recording of transactions as and when they take place that is purchase and sale transactions are recorded whenever they occur. Specific Identification Method: Under this method, there is a continuous tracking of the inventory and the inventory cost at the time of purchase on the basis of unique identity which thus helps in the valuation of the ending inventory as well as the cost of goods sold. This method is used generally when the company is involved in limited expensive goods which are easily identifiable. The cost of ending inventory when specific identification method is used under the perpetual inventory system.

Question

Want to see the full answer?

Answer 1

Question

Chapter 5, Problem 14QS

To determine

Inventory:

Inventory refers to the stock or goods which will be sold in the near future and thus is an asset for the company. It comprises of the raw materials which are yet to be processed, the stock which is still going through the process of production and it also includes completed products that are ready for sale. Thus inventory is the biggest and the important source of income and profit for the business.

Perpetual Inventory System:

In perpetual inventory system, there is a continuous recording of transactions as and when they take place that is purchase and sale transactions are recorded whenever they occur.

Specific Identification Method:

Under this method, there is a continuous tracking of the inventory and the inventory cost at the time of purchase on the basis of unique identity which thus helps in the valuation of the ending inventory as well as the cost of goods sold. This method is used generally when the company is involved in limited expensive goods which are easily identifiable.

The cost of ending inventory when specific identification method is used under the perpetual inventory system.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Summit Furniture shipped out an order on April 5th (FOB destination) for a total of $32,500.00. The terms of payment are 3/10, net 40. The order arrived on April 6th. On April 7th, the customer returned $3,800.00 worth of items due to damage. On April 9th, a credit of $5,000.00 was granted for minor defects, but the customer kept the items. The customer paid the invoice on April 12th. What is the balance in the Accounts Receivable (AR) account on April 8th?

General accounting question

A promissory note has the following details: Principal: $5,000 . Term: 90 days . Interest: $150 Find the interest rate (Assume a 360- day year).