ACC 100 Chapter Notes - Chapter 6: Perpetual Inventory

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It is expensive to store inventory as this requires additional space: additional inventory is not generating revenue despite its initial expense. Inventory that goes a long time without being sold is at a higher risk of becoming obsolete: as a result, it may be sold for less than it cost to buy. The remaining inventory is now valued at ,000. A business purchases two differently-priced cars, resulting in the following average inventory cost: The business buys a third differently-priced car which changes the average inventory cost: The business sells the green car for ,000 and enters the following transaction into the accounting system: The remaining inventory is now valued at ,000. A business purchases two differently-priced cars for the following: The business sells the blue car for ,000 and enters the following transaction into the accounting system: The fifo method assumes the oldest goods are sold first, even when that is not the case.

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