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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: TOOL
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