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Concept Introduction:
Perpetual Inventory System: The perpetual inventory system records and updates the inventory after each and every transaction. The inventory balance is updated after each transaction and it is kept up to date at every time.
Methods of
• Specific identification method: Under this method the cost of goods sold and ending inventory units are identifiable and the cost is calculated accurately for each unit sold and in the inventory.
• Weighted Average method: Under this method, the cost per unit of the inventory is calculated as weighted average cost per unit and the cost of goods sold and inventory is calculated with the help of weighted average cost per unit.
• FIFO method: FIFO Stands for First In First Out. Under this method, the units purchased first are assumed to be sold first and cost of goods sold is calculated accordingly. The ending inventory in the method includes the latest units purchased.
• LIFO method: LIFO Stands for Last In First Out. Under this method, the latest units purchased are assumed to be sold first and cost of goods sold is calculated accordingly. The ending inventory in the method includes the oldest units purchased.
Requirement (a):
To determine: Cost of ending inventory and Cost of goods sold using the Specific identification method.
Requirement (b):
To determine: Cost of ending inventory and Cost of goods sold using the perpetual inventory weighted average method.
Requirement (c):
To determine: Cost of ending inventory and Cost of goods sold using the perpetual inventory FIFO method.
Requirement (d):
To determine: Cost of ending inventory and Cost of goods sold using the perpetual inventory LIFO method.
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Chapter 6 Solutions
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