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  3. bike world recently opened several stores in new south wales...

Question: bike world recently opened several stores in new south wales...

Question details

Bike World recently opened several stores in New South Wales. The owner is considering whether a perpetual or periodic inventory system should be used. The company also has an inventory of a bike model with details below:

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Requirements:

  • Explain the essential differences in accounting treatments between perpetual and periodic inventory systems. You have to use journal entries to demonstrate each difference. With the nature of Bike World’s business, which system would you suggest to the owner? Why?
  • Using a spreadsheet, calculate the ending inventory and Cost of Goods Sold for June, using the average cost, LIFO, and FIFO methods. Present your answers in both normal and formula views with rows and column headings. In the spreadsheet, you are required to have a data section separated from a report section.
  • The company is not doing very well and the owner wants to call funds from potential investors. Based on all the above factors, what inventory method would you suggest to the owner, why?
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