Chapter 6, Problem 6.16E

(a)

To determine

Perpetual Inventory System: Perpetual Inventory System refers to the inventory system that maintains the detailed records of every inventory transactions related to purchases and sales on a continuous basis. It shows the exact on-hand-inventory at any point of time.

Inventory cost flow: It refers to the flow (movement) of inventory when it is purchased or sell by the business organization.

The various inventory cost flow methods are:

• First-in, first-out (FIFO)
• Last in, first-out (LIFO)
• Average-cost

FIFO method: In FIFO method, those goods are sold first which are purchased first by the business organization.

LIFO method: In LIFO method, those goods are sold first which are purchased in last by the business organization

Average-cost method: In average-cost method, the value of inventory is calculated by the average of cost of goods sold which are available for the sale purpose for that period.

To determine: Prepare inventory schedule under perpetual system by FIFO method, LIFO method and moving-average cost.

(b)

To determine

Compare results with results of E-6 and E-7.

(c)

To determine

The reason for average unit cost not being $6.