P. Forte commences business on 1 January buying and selling pianos.

He sells two standard types, upright and grand, and his transactions for the year are as follows:

You observe that the cost to P. Forte of the pianos is changed on 1 April, 1 July and 1 October, and will not change again until 1 January following.
Required:

(a) Prepare a statement showing gross profit and closing stock valuation, separately for each type of piano, under each of the following assumptions: (i) FIFO, (ii) LIFO, (iii) weighted average.

(b) At a time of rising prices (i.e. using the grand pianos as an example)
comment on the usefulness of each of the methods.

Transcribed Image Text:

Upright Grand buy sell buy sell 1 Jan. 31 March 2 at 400 2 at 600 1 at 600 30 April 1 at 350 1 at 700 30 June 1 at 600 1 at 1,000 31 July 2 at 300 1 at 800 30 Sept. 3 at 500 2 at 1,100 30 Nov. 1 at 250 1 at 900