Chapter 6, Problem 8CP

To determine

Concept Introduction:

FIFO- Perpetual inventory System: FIFO (First in first out) method assumes the flow of inventory in the same order of its purchase. In other words, the oldest purchase is assumed to be sold first in order of purchases made. The FIFO method can be applied using perpetual or periodic method. In the perpetual inventory method, the inventory balance is updated after each inventory transaction.

Multiple Step income Statement: This is the format of income statement that find the net operating income by calculating gross profit as a difference of Sales revenue and Cost of goods sold and then net operating profits are calculated after subtracting the total operating expenses from gross profits.

Statement of owner’s equity: This statement shows the net balance in the capital after adjusting the withdrawals and net income earned during the year.

Classified balance sheet: This format of balance sheet classifies the accounts in separate heading like current assets, long term assets, properly plant and equipments, Current liabilities, long term liabilities and Equity.

To prepare: Multiple Step income Statement, Statement of owner’s equity and Classified balance sheet