Perpetual and Periodic Inventory Systems 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.

AppendixLO1