(a) Smart Choice sells mobile accessories. At December 31, 2020, Smart Choice's inventory amounted to...
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(a) Smart Choice sells mobile accessories. At December 31, 2020, Smart Choice's inventory amounted to Rs. 2500. During the first week in January 2021, the Smart Choice made the following transactions: Jan. 4 Purchased 5 Power ICs and 10 LED Units. The total cost of these items was Rs. 2000. Jan. 5 Sold 6 different types of products on account to Pace Corporation. The total sales price was Rs. 900. The total cost of these 6 units was Rs. 700. Instructions 1. Prepare journal entries to record these transactions, assuming that Smart Choice uses a perpetual inventory system. 2. Compute the balance in the Inventory account at the close of business on January 5. 3. Prepare journal entries to record the transactions, assuming that Smart Choice uses a periodic inventory system. 4. Compute the cost of goods sold for the first week of January assuming use of the periodic system. 5. Which type of inventory system do you think Smart Choice most likely would use? Explain your reasoning, 6. Compute the gross profit margin on the January 5 sales transaction. (b) What are the competing arguments within inventory evaluation methods? Which one is best in view of real world scenarios?
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