Pappa's Appliances uses the periodic inventory system. Details regarding the inventory of appliances at January 1, 2016, purchases invoices during the year, and the inventory count at December 31, 2016, are summarized as follows:

Instructions
1. Determine the cost of the inventory on December 31, 2016, by the first-in, first-out method. Present data in columnar form, using the following headings:

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, 2016, by the last-in, first-out method, following the procedures indicated in (1).
3. Determine the cost of the inventory on December 31, 2016, by the weighted 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
(b) Declining prices.

Transcribed Image Text:

Purchases Invoices Inventory, January 1 3 at $1,040 3 at $1,054 3 at $1,060 3 at $1,070 9 at 639 7 at 645 6 666 6at 675 5 at 240 3 at 260 1 at 260 1 280 6 at 305 3 at 310 3 at 316 4at 317 6 at 520 8 at 531 4 at 549 6at 542 Inventory Count, December 31 Model C55 D11 F32 H29 K47 S33 X74 1st 2nd 3rd 4 4 8 4 at 222 4 at 23.2 4 at 35 6at 36 8at 37 7 at 39 Model Quantity Unit Cost Total Cost