Records of the Genesis Corporation reveal the following information about inventory during the year.
January1 Beginning inventory 1,000 units @$10
March15 Purchase of inventory 3,500 units @$12
July 21Sale of inventory 4,000units
September 12 Purchase of inventory 1,600 units @$14
October31 Sale of inventory 1,200units
The company's accountant is trying to decide whether to determine Cost of Goods Sold using the perpetual inventory system (calculating Cost of Goods Sold after every sale) or the periodic inventory system (calculating Cost of Goods Sold at the end ofthe year only). Assume the company uses the LIFO method for inventory costing.
Required Using the information given above, answer each of the following questions.
A. How many units have been sold? How many units remain in ending inventory?
B. What is Cost of Goods Sold using the perpetual method? The periodic method? What is the cost of ending inventory for each method?
C. Is there a difference in net income for each method? Why? (Assume for purposes of this question that Sales Revenue is $85,000 and all other expenses are $5,600.)
D. What are the advantages of using perpetual? Using periodic?