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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.
In First-in-First-Out method, the cost of initial purchased items are sold first. The value of the ending inventory consists the recent purchased items.
In Last-in-First-Out method, the cost of last purchased items are sold first. The value of the closing stock consists the initial purchased items.
In Average Cost Method the cost of inventory is priced at the average rate of the goods available for sale. Following is the mathematical representation:
To Compute: The ending inventory at May 31, and cost of goods sold using the FIFO methods.
To Prove: The amount allocated to cost of goods sold under FIFO method.
To Compute: The ending inventory at May 31, and cost of goods sold using the LIFO methods.
To Prove: The amount allocated to cost of goods sold under LIFO method.
To Compute: The ending inventory at May 31, and cost of goods sold using the average-cost methods.
To Prove: The amount allocated to cost of goods sold under average-cost method.
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Chapter 6 Solutions
FINANCIAL ACCOUNTING: TOOLS FOR BUSINES
- Marvin Company is a subsidiary of Hughes Corp. The controller believes that the yearly allowance for doubtful accounts for Marvin should be 8% of gross accounts receivable. Given the recession and the high interest rate environment, the president, nervous that the parent company might expect the subsidiary company to sustain its 10% growth rate, suggests that the controller increase the allowance for doubtful accounts to 9%. The president thinks that the lower net income, which reflects a 6% growth rate, will be a more sustainable rate for Marvin Company. On the basis of the case above: In a recessionary environment with tight credit and high interest rates, What steps Marvin Company might consider to improve the accounts receivable situation? Evaluate each step identified in terms of the risks and costs involved. Should the controller be concerned with Marvin Company's growth rate in estimating the allowance? Does the president's request pose an ethical dilemma for the controller?…arrow_forwardPlease provide answer this financial accounting questionarrow_forwardFinancial Accountingarrow_forward
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