(Learning Objectives 1, 2: Show how to account for inventory in a perpetual system using the… 1 answer below »

(Learning Objectives 1, 2: Show how to account for inventory in a perpetual system using the… 1 answer below »

(Learning Objectives 1, 2: Show how to account for inventory in a perpetual system using the average-costing method) Big Buy purchases inventory in crates of merchandise; each crate of inventory is a unit. The fiscal year of Big Buy ends each January 31. Assume you are dealing with a single Big Buy store in Miami, Florida. The Miami store began 2014 with an inventory of 20,000 units that cost a total of $1,060,000. During the year, the store purchased merchandise on account as follows:

Cash payments on account totaled $8,968,000. During fiscal year 2014, the store sold 154,000 units of merchandise for $15,785,000, of which $5,500,000 was for cash and the balance was on account. Big Buy uses the average-cost method for inventories. Operating expenses for the year were $3,750,000. Big Buy paid 70% in cash and accrued the rest as accrued liabilities. The store accrued income tax at the rate of 40%.

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