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Chapter 6 Lecture 2 More examples - Now that we thoroughly...

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Now that we thoroughly understand the difference between LIFO and FIFO ([email protected]$ %[email protected]!**!?), let's merge those ideas of inventory cost flows with how we record purchases and sales, using perpetual and periodic sales. Under a periodic inventory system, you have a purchases account which is closed at FYE, and ending inventory is calculated at FYE by counting inventory and systematically applying costs to units of ending inventory. First, here are the journal calculations for ending inventory, using the periodic method and the three different cost valuation methods: Sales 2,600 units $165,000 Beginning Inventory 300 @ $30 $ 9,000 Purchases 800 @ $33 26,400 1,000 @ $36 36,000 1,200 @ $39 46,800 Goods Available For Sale 3,300 $118,200 PERIODIC AVERAGE COST Goods Available For Sale 3,300 $118,200 Ending Inventory 700 @ $35.82 <25,074> Cost of Goods Sold $93,126 Gross Margin $71,874 PERIODIC FIFO METHOD Goods Available For Sale 3,300 $118,200 Ending Inventory 700 @ $39 <27,300> Cost of Goods Sold $90,900 Gross Margin $74,100 PERIODIC LIFO METHOD Goods Available For Sale 3,300 $118,200 Ending Inventory 300 @ $30
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400 @ $33 < 22,200> Cost of Goods Sold $ 96,000 Gross Margin $69,000 But, when a merchandiser adopts a perpetual inventory system , the
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