Chapter 6, Problem 6.8AP

(a)

To determine

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.

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.

Moving -average cost method: Under moving average cost method company calculate a new average after every purchases made. It is determined by dividing the cost of goods available for sale by the units on hand.

To Calculate: The cost of goods sold, ending inventory, and gross profit under LIFO, FIFO, and Moving-average method.

(b)

To determine

To Compare: The results for the above three cost flow assumptions.