Following is a partial list of account balances for two different merchandising companies. The amounts in the accounts represent the balances at the end of the year before any adjustments are made or the books are closed.
Company A__________________________
Sales Revenue $50,000
Sales Discounts 3,000
Merchandise Inventory 12,000
Cost of Goods Sold 38,000
Company B___________________________
Sales Revenue $85,000
Sales Discounts 2,000
Merchandise Inventory 9,000
Purchases 41,000
Purchase Discounts 4,000
Purchases Returns and Allowances 1,000
Required
1. Identify which inventory system, perpetual or periodic, each of the two companies uses. Explain how you know which system each company uses by looking at the types of accounts on its books.
2. How much inventory does Company A have on hand at the end of the year? What is its cost of goods sold for the year?
3. Explain why you cannot determine Company B’s cost of goods sold for the year from the information available.