Zane Corporation uses the perpetual inventory system. The following sales and purchases of the same product were made during 2018. The opening inventory consisted of 200 units at $1 each.
*for specific identification, sold 150 units April 15 purchase
**for specific identification, sold 300 units of October 15 purchase
Required:
1. Calculate cost of goods sold and the cost of ending inventory under each of FIFO, specific identification, and weighted average inventory cost flow assumptions. Set up a table as follows:
|
Purchased |
Sold |
Balance in inventory |
|||||||
|
Date |
Units |
Unit cost |
Total $ |
Units |
Unit cost |
Total $ |
Units |
Unit cost |
Total $ |
|
Jan. 1 |
200 |
$1 |
$200 |
||||||
2. Prepare calculations comparing the effect on cost of goods sold of the three inventory cost flow assumptions.
3. The president wants to maximize the company’s ending inventory this year. What would you suggest that is in accordance with GAAP?
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