Chapter 8, Problem 8.7BE

(1)

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.

FIFO: Under this inventory method, the units that are purchased first, are sold first. Thus, it starts from the selling of the beginning inventory, followed by the units purchased in a chronological order of their purchases took place during a particular period.

Average cost method: Under this method, the cost of the goods available for sale is divided by the number of units available for sale during a particular period.

To calculate: the ending inventory and the cost of goods sold for January using FIFO.

(2)

To determine

To calculate: the ending inventory and the cost of goods sold for January using average cost.