Novak Inc. is a retailer using a perpetual inventory system. All sales returns from customers result in the goods being returned to inventory. (Assume that the inventory is not damaged.) Assume that there are no credit transactions; all amounts are settled in cash. You are provided with the following information for Novak Inc. for the month of January. Date Description Dec. 31 Jan. 2 Jan. 6 Jan. 9 Jan. 9 Jan. 10 Jan. 10 Jan. 23 Jan. 30 Quantity Beginning inventory Purchase Sale Sale return Purchase Purchase return Sale Purchase Sale Unit Cost or Selling Price 160 100 180 10 75 15 50 100 120 $20 22 38 38 24 24 46 27 50 (a) Using FIFO method, calculate (i) cost of goods sold, (ii) ending inventory, and (iii) gross profit. (Assume sales returns had a cost of $20 and purchase returns had a cost of $24)

The transaction analysis is done with the help of the accounting equation. The basic accounting equation is alternatively known as the balance sheet equation is based on the double-entry system which says that for each transaction happening in a business…