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ch8homework - 3 In a perpetual inventory system data are...

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3. In a perpetual inventory system, data are available at any time on the quantity and dollar amount of each item of material or type of merchandise on hand. A physical inventory means that inventory is periodically counted (at least once a year) but that up-to-date records are not necessarily maintained. Discrepancies often occur between the physical count and the perpetual records because of clerical errors, theft, waste, misplacement of goods, etc. 4. No. Mishima, Inc. should not report this amount on its balance sheet. As consignee, it does not own this merchandise and therefore it is inappropriate for it to recognize this merchandise as part of its inventory. 16. The LIFO method results in a smaller net income because later costs, which are higher than earlier costs, are matched against revenue. Conversely, in a period of falling prices, the LIFO method would result in a higher net income because later costs in this case would be lower than earlier costs, and these later costs would be matched against revenue. 17. The dollar-value method uses dollars instead of units to measure increments, or reductions in a LIFO inventory. After converting the closing inventory to the same price level as the opening in-ventory, the increases in inventories, priced at base-year costs, is converted to the current price level and added to the opening inventory. Any decrease is subtracted at base- year costs to determine the ending inventory. The principal advantage is that it requires less record-keeping. It is not necessary to keep records nor make calculations of opening and closing quantities of individual items. Also, the
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