Inventory valuation methods: computations and concepts. Wave Riders Surfboard Company began business on January 1 of the current year. Below are the transactions for the year
:
1/3:
Purchase 100 boards @$125
3/17:
Sold 50 boards @ $250
4/3:
Purchase 200 boards @$135
5/17:
Sold 75 boards @ $250
6/3:
Purchase 100 boards @$145
1/3:
Purchase 100 boards @$155
3/17:
Sold 300 boards @ $250
1/3:
Purchase 100 boards @$140
Wave Riders uses a perpetual 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) approximate the physical flow of a sand and gravel dealer?