The following information is taken from the records of East Oak Distributors Inc. The company uses the perpetual inventory system.
|
Date |
Units |
Unit Cost |
||
|
May |
1 |
Opening Inventory |
100 |
$1 |
|
5 |
Sale #1 |
80 |
||
|
6 |
Purchase #1 |
200 |
5 |
|
|
12 |
Purchase #2 |
125 |
3 |
|
|
13 |
Sale #2* |
300 |
||
|
19 |
Purchase #3 |
350 |
2 |
|
|
29 |
Purchase #4 |
150 |
1 |
|
|
30 |
Sale #3** |
400 |
||
*for specific identification, sold 175 units of purchase #1 and all units of purchase #2.
**for specific identification, sold 20 units of opening inventory, 300 units of purchase #3, and 80 units of purchase #4.
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Required: |
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|
1. |
Calculate cost of goods sold and the cost of ending inventory under each of the following inventory cost flow assumptions: |
|
|
a. |
FIFO |
|
|
b. |
Specific identification |
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|
c. |
Weighted average. |
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|
2. |
Assume each unit was sold for $5. Complete the following partial income statements : |
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3. |
Which costing method would you choose if you wished to maximize net income? Maximize ending inventory value? |
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