Chapter 6, Problem 6.9AP

(a) (1)

To determine

Perpetual Inventory System:

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.

First-in-First-Out:

In First-in-First-Out method, the costs of the initially purchased items are considered as cost of goods sold, for the items which are sold first. The value of the ending inventory consists of the recent purchased items.

Last-in-Last-Out:

In Last-in-First-Out method, the costs of last purchased items are considered as the cost of goods sold, for the items which are sold first. The value of the closing stock consists of the initial purchased items.

Moving -average cost method:

Under moving average cost method, the company calculates a new average cost after every purchase is made. It is determined by dividing the cost of goods available for sale by the units on hand.

The ending inventory under a perpetual inventory system using FIFO.

(2)

To determine

The ending inventory under a perpetual inventory system using moving-average cost.

(3)

To determine

The ending inventory under a perpetual inventory system using LIFO.

 (b)

To determine

To identify: The costing method which produces the highest ending inventory valuation.