Booth Sales uses the perpetual inventory system for the purchase and sale of inventory and had the following information available on August 31, 2017:
Required
1. Calculate the cost of goods sold and the cost of the for August under
(a) Moving-weighted-average cost
(b) FIFO cost.
2. Prepare the journal entries required to record the August transactions using the perpetual inventory system with FIFO costing.
3. An internal audit has discovered that two new employees-an accounting clerk and an employee from the purchasing department-have been stealing merchandise and covering up the shortage by changing the inventory records.
The external auditors examined the accounting records prior to the employment of the two individuals and noted that the company had an average gross margin rate of 50 percent. The physical count matched the estimate. Use the gross margin method to estimate the cost of the inventory difference (under the FIFO costing method). Explain the difference between the three inventory values-records, physical count, and estimates-and their importance in valuing inventory.
4. What would be the effect on the for the year ending August 31, 2017, if the inventory difference had not been discovered?
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