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Appendix A: (Periodic) Recording Inventory Transactions Purchases: is a temporary account used in the periodic inventory system to keep track of purchases of inventory. It
Appendix A: (Periodic) Recording Inventory Transactions Purchases: is a temporary account used in the periodic inventory system to keep track of purchases of inventory. It is NOT an asset account; it is part of the calculation of COGS. (BI + Cost of Purchases =GAFSEl=COGS). Practice GIM, Inc., begins the year with inventory of $25,000 and ends the year with inventory of $12,000. During the year the company purchased inventory with a cost of $185,000 and had net sales of $300,000 More Practice PART C: Other Inventory Reporting Issues Lower-of-Cost-and Net Realizable Value -conservatism - costs versus net realizable value (sales price less cost to sell) -write-down goes to cost of goods sold ANALYSIS: Inventory Turnover Ratio The inventory turnover ratio is a measure of the effectiveness in managing inventory
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