Question

LOL. What are the accounting principles and controls that relate to merchandise inventory a) Give a brief definition of the following: Consistency Principle- ii) Disclosure Principle - 1) Materiality Concept - iv) Conservatism - L02. How are merchandise inventory costs determined under a perpetual inventory system Use the following information to answer the next 2 questions: Beginning Inventory January 1st = 100 units x S10 = $1,000 Purchases on January 15th = 100 units x S12 = $1,200 a) Using the perpetual system and FIFO method, what is the Cost of Goods Sold if we sell 125 units on January 20? Please show work b) Using the perpetual system and LIFO method, what is the Cost of Goods Sold if we sell 125 units on January 20? Please show work. LO3. How are the financial statements affected by using different inventory costing methods a) When inventory costs are rising, (LIFO or FIFO) results in the highest cost of goods sold. b) When inventory costs are rising, (LIFO or FIFO results in the lowest net income. LO6. How do we use inventory turnover and days' sales in inventory to evaluate business performance a) What are the formulas for inventory turnover and days' sales in inventory? b) Calculate the inventory turnover and days' sales in inventory based on the information below (show work): Cost of goods sold $11,000 Beginning merchandise inventory 4,000 Ending merchandise inventory 3,000

Answer 1

Answer-1)

i) Consistency: The consistency states that the same accounting principles, policies and procedures when once used or applied must be used regularly on a period to period basis for preparing financial statements for facilitating comparison of financial statements on period to period basis.

ii) Full disclosure: Accounting reports must disclose all facts that may influence the judgment of an informed reader. The full disclosure principle states that a company is required to provide the required necessary information so that people who are accustomed to reading financial information can make informed decisions concerning the business.

iii) Materiality concept: The concept of materiality states that while accounting only those transactions will be considered which have material effect on financial status of the company and other transactions which have insignificant impact will be ignored.

iv) Conservatism: The concept states that when there are available choices of equally acceptable accounting methods, the company need to choose the method which is least likely to overstate assets or income

　

As per policy we have to answer first question