problem $1$: Costello Corporation uses a perpetual inventory system. At the end of the year, the inventory balance reported by its system is $$45,270.$ Costello performs an inventory count and determines that the actual ending inventory is $$39,780.$

Discuss why a company that uses a perpetual inventory system would perform a physical inventory count.

Why might the ending balance in inventory differ between the perpetual inventory system and physical inventory count?

Assume that Costello believes the difference is due to errors made by its accounting staff and this is a normal risk in tracking inventory. Record the journal entry Costello should make in this case.

Problem$2$

: Paula$$s Parkas sells NorthPlace jackets. At the beginning of the year, Paula$$s had twenty jackets in stock, each costing $$35$ and selling for $$60.$ The following table details the purchases and sales made during January:

Date Number of Items Cost per Item

January $2$ Purchased $12$ $$36\mathrm{.}00$

January $8$ Purchased $1036\mathrm{.}50$

January $10$ Sold $15$

January $17$ Sold $14$

January $22$ Purchased $837\mathrm{.}00$

January $28$ Sold $10$

Assume that Paula$$s Parkas uses the perpetual FIFO method.

Show the journal entries and T accounts needed to record the transactions during January

Determine Paula$$s Parkas cost of goods sold and ending inventory for January.

Determine Parka$$s gross profit for January.