Inventory valuation methods. Computations and concepts.

Wave Riders Surf Board Company began business on January 1 of the current year.

Purchases of surf boards were as follows:

Jan. 3

100 boards @ $125

Mar. 17

50 boards @ $130

May 9

246 boards @ $140

July 3

400 boards @ $150

Oct. 23

74 boards @ $160

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


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?

(3) report low earnings (for tax purposes) for a separate electronics company that has been experiencing declining purchase prices?