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Chapter 3. Valuing Inventories for the B... > Using Perpetual and Periodic Invento...

Using Perpetual and Periodic Inventory Systems

As mentioned at the beginning of this chapter, businesses that deal in goods that carry a high value usually have an easier time tracking their inventories. A boat dealer, for example, tends to have fewer units in stock than does an office supply store. Other things being equal, it is easier for the boat dealer to do a physical count of the number of boats in the inventory than for the office supplier to count the number of reams of photocopy paper in stock.

The boat dealer can determine the cost of goods sold and the value of the ending inventory on a daily basis. It is simply a matter of counting the number of boats sold, shown on the sales receipts, and multiplying that number by the cost of each unit. The boat dealer might use any one of the four valuation methods discussed previously to calculate the cost of goods sold.


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