Perpetual Inventory system

Number of units Unit cost Unit sale price

Mar.1 Beginning Inventory 50 15

Mar.2 Purchase 12 20

Mar.8 Sale 40 36

Mar.17 purchase 24 25

Mar.22 Sale 31 40

How do I prepare the Inventory record?


Should I use the unit sale price of $36 for the sale of 40 units on March 8th or use the unit cost of $ 20 and $15?

Any help in this matter is appreciated.

What are the element of a perpetual inventory system

There isn't any way to say whether it's $15 or $10 without knowing if it's LIFO or FIFO. However, you don't use the sales price. The idea behind doing this is that whenever something is sold by the company, they need to recognize removing the units out of inventory at their COST. They go into inventory at cost and therefore must come out at cost. The cost thus far is $15 and $20. So that's what you're using. The $36 is the sales price, which is higher than cost so they can make a profit. If you used $36, there would be nothing to figure out. :-)

Also, please be careful to put $ on dollars. When you're working with both unit numbers and dollar amounts, you need to distinguish the difference.

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Originally Posted by sanmisa

What are the element of a perpetual inventory system

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Please post your questions under your own new thread.

Also, I have no idea what is meant by an "element" of an inventory system. That's not an official accounting term and is just something your book chose to call something. You need to look through the explanations in your book and see what they are referring to. If you can even find an example of what they mean, that might help.