The records of Armstrong Aviation include the following accounts for inventory of aviation fuel at December 31 of the current year:
|
Inventory |
||||
|
1 |
Balance |
700 units @ $7.00 |
4,900 |
|
|
6 |
Purchase |
300 units @ 7.05 |
2,115 |
|
|
June |
22 |
Purchase |
8,400 units @ 7.50 |
63,000 |
|
4 |
Purchase |
500 units @ 8.50 |
4,250 |
|
Sales Revenue |
||
|
Dec. 31 |
9,000 units |
127,800 |
Required
1. Prepare a partial income statement through gross profit under the average, FIFO, and LIFO methods. Round average cost per unit to 4 decimal places and all other amounts to the nearest dollar.
2. Which inventory method would you use to minimize income tax? Explain why this method causes income tax to be the lowest.