Smiller Company uses a periodic inventory system. At the end of the annual accounting period, December 31, 2010, the accounting records for the most popular item in inventory showed the following:
Required:
Compute the cost of goods available for sale (a), cost of ending inventory (b), cost of goods sold (c) at December 31, 2010, under each of the following inventory costing methods. (show solutions and round to the nearest dollar)
1. Weighted average cost
2. First-in, first-out
3. Last-in, first-out
4. Specific identification, assuming that the first sale was selected two-fifths from the beginning inventory and three-fifths from the purchase of February 20, 2010. Assume that the second sale was selected from the remainder of the beginning inventory, with the balance from the purchase of June 30, 2010.
Gladstone 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 annual accounting period, December 31.
Transactions
Units
Unit Cost
Beginning inventory, January 1
1,600
$
45
Transactions during the year:
a.
Purchase, January 30
2,300
49
b.
Sale, March 14 ($100 each)
(1,250
)
c.
Purchase, May 1
1,000
75
d.
Sale, August 31 ($100 each)
(1,500
)
Assuming that for Specific identification method (item 1d) the March 14 sale was selected two-fifths from the beginning inventory and three-fifths from the purchase of January 30. Assume that the sale of August 31 was selected from the remainder of the beginning inventory, with the balance from the purchase of May 1.
Required:
1.
Compute the amount of goods available for sale, ending inventory, and cost of goods sold at December 31 under each of the following inventory costing methods: (Round intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.)
2-a.
Of the four methods, which will result in the highest gross profit?
Last-in, first-out
Weighted average cost
First-in, first-out
Specific identification
2-b.
Of the four methods, which will result in the lowest income taxes?
