On July 31, 2008 the balances of the accounts appearing in the ledger of Odell Company are as follows:

On July 31, 2008 the balances of the accounts appearing in the ledger of Odell Company are as follows:

Cash $73,200 Sales Discount $37,500

Accounts Receivable 288,500 Purchases 2,146,000

Merchandise Inventory, Aug 1, 2007 350,900 Purchases Returns and Allowances 24,000

Office Supplies 12,100 Purchase Discounts 18,000

Prepaid Insurance 18,000 Transportation In 43,600

Land 140,000 Sales Salaries Expense 625,000

Store Equipment 683,100 Advertising Expense 220,000

Accumulated Depreciation--- Delivery Expense 36,000

Store Equipment 223,600 Depreciation Expense-

Office Equipment 314,000 Store Equipment 23,600

Accumulated Depreciation—

Miscellaneous Selling Expense 42,800

Office Equipment 65,000 Office Salary Expense 400,000

Accounts Payable 111,300 Rent Expense 125,000

Salaries Payable 11,800 Insurance Expense 12,000

Unearned Rent 33,200 Office Supplies Expense 9,200

Notes Payable 50,000 Depreciation Expense—

Capital Stock 100,000 Office Equipment 6,000

Retained Earnings 660,200 Miscellaneous Administrative Expense 23,400

Dividends 75,000 Rent Revenue 25,000

Sales 4,425,800 Interest Expense 3,000

Sales Returns and Allowances 40,000

Question: Does Odell company use the periodic or perpetual inventory system? Explain. 

SOLUTION PREVIEW

Odell Company uses periodic Inventory system. This is explained as below: 

Differences between periodic and perpetual Inventory System:

Periodic Inventory System	Perpetual Inventory System	Reason to state the method
Inventory account and cost of goods sold are non-existent until the physical count at the end of the year.	Account and the balance of costs of goods sold and inventory account exist all the time.	No cost of goods sold account in the list of accounts above.

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