Explanation Periodic Inventory System: It is a system in which the inventory is updated in the accounting records on a periodic basis such as at the end of each month, quarter or year. In other words, it is an accounting method which is used to determine the amount of inventory at the end of each accounting period. Identify the item designated by the letters X , and Y for the following given equation. a. Given equation: Purchases − ( X + Y ) = Net purchases ⇒ [ Purchases − ( Purchase returns and allowances + Purchase discount ) ] = Net purchases Description: ‘Purchase returns and allowances’, and ‘purchase discount’ are to be added together and then deducted from the purchases to determine the net purchases. Therefore, the designated letters X and Y denotes ‘Purchase returns and allowances’, and ‘purchase discount’. b. Given equation: Net purchases + X = Cost of goods purchased ⇒ Net purchases + Freight-in = Cost of goods purchased Description: Freight-in is always added to the net purchases to determine cost of goods purchased. Therefore, the designated letters X denotes ‘Freight-in’. c. Given equation: Merchandise inventory ( beginning ) + Cost of merchandise purchased = X ⇒ [ Merchandise inventory ( beginning ) + Cost of merchandise purchased ] = ( Cost of merchandise available for sale ) Description: Cost of merchandise available for sale is calculated by adding beginning inventory to the cost of merchandise purchased

15th Edition

ISBN: 9781337272124

Author: Carl Warren, James M. Reeve, Jonathan Duchac

Publisher: Cengage Learning

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Chapter 6, Problem 35E

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Chapter 6, Problem 34E

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