The opening inventory of Tan Corporation at January 1, 2018 consisted of 50 units at $1 each. The company uses the periodic inventory system. The following purchases were made during 2018.
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Units |
Unit Cost |
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Apr. |
15 |
200 |
$2 |
|
May |
25 |
200 |
$3 |
|
June |
7 |
200 |
$4 |
|
Oct. |
15 |
200 |
$5 |
|
Required: |
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1. |
Calculate the number of units available for sale. Then calculate the dollar amount of cost of goods available for sale at December 31, 2018. Set up a column for each of FIFO, specific identification, and weighted average inventory cost flow assumptions as follows: |
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2. |
If there are 200 units on hand at December 31, 2018, calculate the cost of ending inventory under each of FIFO, specific identification, and weighted average inventory cost flow assumptions. . For specific identification purposes, items sold were: |
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50 units of the April 15 purchases 200 units of the May 25 purchases 200 units of the June 7 purchases 200 units of the October 15 purchases |
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3. |
Calculate the cost of goods sold under each of FIFO, specific identification, and weighted average inventory cost flow assumptions. Set up a table as follows: |
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4. |
Based on the calculations in (3), the president of Tan Corporation has asked you to prepare some calculations comparing the effect on income of a. Using a weighted average cost flow method instead of specific identification; b. Using a FIFO cost flow method instead of specific identification. |
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5. |
What method of cost flow would you recommend in this case? Why? |
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