. Inventory valuation methods: computations and concepts.
Wild Riders Surfboard Company began business on January 1 of the current year. Purchases of surfboards were as follows:
|
Date |
Quantity |
Unit Cost |
Total Cost |
|
1/3 |
100 |
$125 |
$12,500 |
|
4/3 |
200 |
$135 |
$27,000 |
|
6/3 |
100 |
$145 |
$14,500 |
|
7/3 |
100 |
$155 |
$15,500 |
|
Total |
500 |
$69,500 |
Wild Riders sold 400 boards at $250 per board on the dates listed below. The company uses a perpetual inventory system.
|
Date |
Quantity Sold |
Unit Price |
Total Sales |
|
3/17 |
50 |
$250 |
$12,500 |
|
5/17 |
75 |
$250 |
$18,750 |
|
8/10 |
275 |
$250 |
$68,750 |
|
Total |
400 |
$100,000 |
Instructions
a.Calculate cost of goods sold, ending inventory, and gross profit under each of the following inventory valuation methods:
A?·First in, first out
A?·Last in, first out
A?·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?