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Calculate COGS Ending Inventory Gross Profit With FIFO LIFO And WAM

Question

Wave Riders Surfboard Company began business on January 1 of the current year. Purchases of surfboards were as follows:

1/3:

100 boards   @ $125

3/17:

50 boards @ $130

5/9:

246 boards @ $140

7/3:

400 boards @ $150

10/23:

74 boards @ $160

Wave Riders sold 710 boards at an average price of $250 per board. The company uses a periodic inventory system.

Instructions

a. Calculate cost of goods sold, ending inventory, and gross profit under each of the following inventory valuation methods:

  • First-in, first-out
  • Last-in, first-out
  • Weighted average

b. Which of the three methods would be chosen if management’s goal is to

(1) produce an up-to-date inventory valuation on the balance sheet?

(2) show the lowest net income for tax purposes?

 

Total Word Count 80

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Comments

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