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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
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. In a perpetual inventory system, every time goods are purchased and sold, the inventory account is increased and decreased, respectively, and this account is updated continually. In a periodic system, the inventory account is not updated each time a purchase or sale is made. The Purchases, Purchase Discounts and Purchase Returns and Allowances accounts are temporary accounts shown on the income statement, closed at the end of the period and used in the periodic system. Refer to the information in the table for Company A. What is the cost of inventory on hand at the end of the year and what is its cost of goods sold for the year? Refer to the information in the table for Company B. What is its cost of goods sold for the year
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