Danilov Computers uses a perpetual inventory system for the purchase and sale of their SSD inventory and had the following information available on November 30, 2023:

Required

1. Calculate the cost of goods sold and the cost of the ending inventory for November under each of the following inventory costing methods: (a) moving-weightedaverage cost and (b) FIFO cost.

2. Prepare the journal entries required to record the transactions using the perpetual inventory system with FIFO costing.

3. An internal audit has discovered that a new employee—an accounting clerk—had been stealing merchandise and covering up the shortage by changing the inventory records. The external auditors examined the accounting records prior to the employment of the individual and noted that the company has an average gross margin rate of 37 percent. Use the gross margin method to estimate the cost of the inventory shortage (under the FIFO costing method). (Note: The physical count matched the estimate.) Explain the difference between the three inventory values— the accounting records, physical count, and estimates—and their importance in valuing inventory.

Transcribed Image Text:

Nov. 1 7 8 12 16 21 25 29 Purchases and Sales Balance of inventory at $40 per unit Purchased at $56 per unit Sold for $76 each Purchased at $52 per unit Sold for $84 each Purchased at $52 per unit Purchased at $48 per unit Sold for $84 each Number of Units 3,900 6,000 4,500 7,500 9,000 4,500 10,500 13,500