A company tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the month. The inventory's selling price is $14 per unit.
Unit
Transactions
Cost
Units
Total Cost
Inventory, X/1
$ 5.00
190
$ 950
Sale, X/10
(140)
Purchase, X/12
5.50
240
1,320
Sale, X/17
(100)
Purchase, X/26
6.50
70
455
Required:
1. Compute the amount of goods available for sale, ending inventory, and cost of goods sold at the end of the month under each of the following inventory costing methods:
a. Weighted average cost.
b. First-in, first-out.
c. Last-in, first-out.
d. Specific identification, assuming that the sale on the 10th of the month was from the beginning inventory and the sale on the 17th was from the purchase on the 12th.
2-a. Of the four methods, which will result in the highest gross profit?
2-b. Of the four methods, which will result in the lowest income taxes?
