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    5. When is cost of goods sold determined in a perpetual inventory

    24. In the following separate mini cases, using a periodic inventory
    system, identify the item(s) designated by letter.
    (a) Purchases _ X _ Y _ Net purchases.
    (b) Cost of goods purchased _ Net purchases _ X.
    (c) Beginning inventory _ X _ Cost of goods available
    for sale.
    (d) Cost of goods available for sale _ Cost of goods
    sold _ X.

    25. "The key to successful business operations is effective inventory
    management." Do you agree? Explain.

    29. Brim Hat Shop received a shipment of hats for which it
    paid the wholesaler $2,940. The price of the hats was
    $3,000 but Brim was given a $60 cash discount and required
    to pay freight charges of $80. In addition, Brim
    paid $130 to cover the travel expenses of an employee
    who negotiated the purchase of the hats. What amount
    will Brim record for inventory? Why?

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    Solution Preview

    5. When is cost of goods sold determined in a perpetual inventory system?
    <br>In this system, detailed records of the cost of each inventory purchase and sale are maintained, the accounting records continuously - perpetually - show the quantity and cost of inventory that should be on hand at any time.
    <br>Under a perpetual inventory system, the cost of goods sold is determined each time a sale occurs.
    <br>(a) X = Purchase returns and allowances
    <br> Y = Purchases discounts
    <br>(We need to subtract the gross purchases with any returns of unwanted goods, and the result is Net Purchases)
    <br>(b) X = Freight-In
    <br>(Freight charges are a necessary cost incurred to acquired inventory, freight-in is added to net purchases at arrive cost of goods purchased)
    <br>(c) X = Cost of goods purchased
    <br>(Add the cost of goods purchased to the cost of ...