1.

James Jenkins Clear Windows Corporation Inventory Costing (FIFO) Transactions Beginning Inventory Purchase, day1 Sale, day2 Purchase, day 3 (24@$36) $864 Purchased (30 @$ 30) $900 (15 @ $33) $495 (18@$30) $ 540 Sold or Issued $900 (30@$30 15@$33) (12@$30 15@$33) (12@$30 15@$33 24@$36) (24@$36) Balance

$1395 $855

Sale, day4

(12@$30 15@$33) $855

$1719 $864

Date Beginning Inventory Purchase, day 1 Sale, day 2 Purchase, day 3 Sale, day4

Purchased (30@ $30) (15@$33) (24@$36)

Clear Windows Corporations Inventory Costing (Moving Average Method) Sold or Issued Balance $900 (30@ $30) $495 (18@$31) $864 $558

$900

(45@$31) $1395 (27@$31) $837 (51 @$33.35) $1700.85

(27@$33.35) $900.45 (24@$33.35) $800.40

a. The second value is incorrect the one which was used for the moving average the correct value is $800.40, whereas when he used the FIFO method he received the correct value which was $864. b. The perpetual inventory system is more informative for inventory control rather than using the periodic inventory system. The reason being the perpetual inventory system maintains a continuous record of inventory changes in the inventory account because the company records all purchases and sales issued of the goods directly in the inventory account. Whereas the periodic inventory system the company only determines the quantity of inventory on hand only periodically.

2. a. This would have affected the income statement of Clear Windows Corporation by overstating the cost of goods sold thus understating the net income of the company.

b. This would cause the statement of financial position of the company with having the inventory, retained earning s, working capital and current ratio all being understated due to this error.

References: Kieso, Donald E., Jerry J. Weygandt, and Terry D. Warfield. "Chapter 8." Intermediate Accounting: IFRS Edition. Hoboken, NJ: Wiley, 2011. N. pag. Print.