Del Mar Appliances uses the periodic inventory system. Details regarding the inventory of appliances at August 1, 2007, purchases invoices during the year, and the inventory count at July 31, 2008, are summarized as follows:
|
|
Inventory, |
|
Purchases In |
|
Inventory Count, |
|
Model |
August 1 |
1st |
2nd |
3rd |
July 31 |
|
T742 |
2 at $125 |
2 at $130 |
4 at $135 |
2 at $140 |
5 |
|
PM18 |
7 at 242 |
6 at 250 |
5 at 260 |
10 at 259 |
9 |
|
K21G |
6 at 80 |
5 at 82 |
8 at 89 |
8 at 90 |
6 |
|
H60W |
2 at 108 |
2 at 110 |
3 at 128 |
3 at 130 |
5 |
|
B153Z |
8 at 88 |
4 at 79 |
3 at 85 |
6 at 92 |
8 |
|
J600T |
5 at 160 |
4 at 170 |
4 at 175 |
7 at 180 |
8 |
|
C273W |
— |
4 at 75 |
4 at 100 |
4 at 101 |
5 |
Instructions
1. Determine the cost of the inventory on July 31, 2008, by the first in, first out method.
Present data in columnar form, using the following headings:
|
Model |
Quantity |
Unit Cost |
Total Cost |
If the inventory of a particular model comprises one entire purchase plus a portion of another purchase acquired at a different unit cost, use a separate line for each purchase. 2. Determine the cost of the inventory on July 31, 2008, by the last in, first out method, following the procedures indicated in (1).
3. Determine the cost of the inventory on July 31, 2008, by the average cost method, using the columnar headings indicated in (1).
4. Discuss which method (FIFO or LIFO) would be preferred for income tax purposes in periods of (a) rising prices and (b) declining prices.