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.

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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.

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Custom Cabinetry has one job in process (Job 120) as of June 30; at that time, its job cost sheet reports direct materials of $7,000, direct labor of $3,400, and applied overhead of $2,890. Custom Cabinetry applies overhead at the rate of 85% of direct labor cost. During July, Job 120 is sold (on credit) for $26,000, Job 121 is started and completed, and Job 122 is started and still in process at the end of July. Custom Cabinetry incurs the following costs during July. Job 120 Direct materials used Direct labor used $ 2,300 3,400 Job 121 $ 7,100 4,700 Job 122 $ 2,600 3,700 1. Prepare journal entries for the following July transactions and events a through e. a. Direct materials used. b. Direct labor used. c. Overhead applied. d. Sale of Job 120. e. Cost of goods sold for Job 120. Hint. Job 120 has costs from June and July. 2. Compute the July 31 balances of the Work in Process Inventory and the Finished Goods Inventory accounts. (There were no jobs in Finished Goods Inventory at June…