Henning Appliances use the periodic inventory system. Details regarding the inventory of appliances at January 1, 2006, purchases invoices during the year, and the inventory count at December 31, 2006, are summarized as follows:

Instructions
1. Determine the cost of the inventory on December 31, 2006, 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 December 31, 2006, by the last-in, first-out method, following the procedures indicated in (1).
3. Determine the cost of the inventory on December 31, 2006, 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) decliningprices.

Transcribed Image Text:

Inventory January1 3 at $208 2 at 520 6 at 520 9 at 213 6 at 305 Purchase Invoices 2nd 5 at $213 2 at 530 4 at 549 6 at 222 3 at 316 4 at 232 8 at 148 Inventory Count, December 31 Model 231T 673W 193Q 144Z 160M 180X 971K 1st 3 at $212 2 at 527 8 at 531 7 at 215 3 at 310 4 at 222 6 at 144 3rd 4 at $225 2 at 535 6 at 542 6 at 225 4 at 317 4 at 140 7 at 156