Kam Company Ltd. had a beginning inventory on January 1 of 100 units of Product 4-18-15 at a cost of HK$210 per unit. During the year, the following purchases were made.
Mar. 15..............300 units at HK$240...............Sept. 4.................300 units at HK$270
July 20...............200 units at HK$250................Dec. 2.................100 units at HK$290
700 units were sold. Kam Company uses a periodic inventory system.
Instructions
(a) Determine the cost of goods available for sale.
(b) Determine
(1) The ending inventory, and
(2) The cost of goods sold under the two assumed cost flow methods (FIFO and average-cost). Prove the accuracy of the cost of goods sold under the FIFO and average-cost methods.
(c) Which cost flow method results in (1) the higher ending inventory amount for the statement of financial position, and (2) the higher cost of goods sold for the income statement?