craig company uses a perpetual inventory system for its one product its beginning in 645464

Craig Company uses a perpetual inventory system for its one product. Its beginning inventory, purchases, and sales during calendar year 2011 follow.

Additional tracking data for specific identification:

(1) January 15 sale — 200 units @ $14,

(2) April 1 sale — 200 units @ $15,

(3) November 1 sale — 200 units @ $14 and 100 units @ $20.

Required

1. Calculate the cost of goods available for sale.

2. Apply the four different methods of inventory costing (FIFO, LIFO, weighted average, and specific identification) to calculate ending inventory and cost of goods sold under each method.

3. Compute gross profit earned by the company for each of the four costing methods in part 2. Also, report the inventory amount reported on the balance sheet for each of the four methods.

4. In preparing financial statements for year 2011, the financial officer was instructed to use FIFO but failed to do so and instead computed cost of goods sold according to LIFO. Determine the impact on year 2011’s income from the error. Also determine the effect of this error on year 2012’s income. Assume no income taxes.

5. Management wants a report that shows how changing from FIFO to another method would change net income. Prepare a table showing (1) the cost of goods sold amount under each of the four methods, (2) the amount by which each cost of goods sold total is different from the FIFO cost of goods sold, and (3) the effect on net income if another method is used instead of FIFO.