To prepare solutions to the following requirements, use the data provided in P7, but assume that the

Question:

To prepare solutions to the following requirements, use the data provided in P7, but assume that the company uses the perpetual inventory system.

In P7, The inventory of Product A and data on purchases and sales for a two-month period follow. The company closes its books at the end of each month. It uses the periodic inventory system.

REQUIRED

1. Determine the cost of ending inventory and cost of goods sold for April and May using the average-cost method. Round unit costs to cents and totals to dollars.

2. Determine the cost of ending inventory and cost of goods sold for April and May using the FIFO method.

3. Determine the cost of ending inventory and cost of goods sold for April and May using the LIFO method.

4. Assume that this company grows for many years in a long period of rising prices. How realistic do you think the balance sheet value for inventory would be, and what effect would it have on the inventory turnover ratio?

Inventory Turnover Ratio
Inventory Turnover RatioThe inventory turnover ratio is a ratio of cost of goods sold to its average inventory. It is measured in times with respect to the cost of goods sold in a year normally. Inventory Turnover Ratio FormulaWhere,... Ending Inventory
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...