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A merchandiser records entries in an inventory cost grid for purchases, cost of merchandise sold, and the running balance. Which column set is identical regardless of whether FIFO, LIFO, or average cost is applied?
AThe Purchases columns
BThe Cost of Sales columns
CThe Inventory Balance columns
DThe Gross Profit columns
Answer & Solution
Correct answer: A. The Purchases columns
1. Entries in the Purchases columns record items bought for resale at their actual purchase cost.
2. These purchase amounts do not depend on which cost-flow method is chosen.
3. The Cost of Sales and Inventory Balance columns do change with the method selected.
4. Therefore the Purchases columns are the same under all methods.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §4.1.1 "Perpetual Inventory System", p.114_
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