The BabyStyle Company is a retail firm buying and selling a single product: prams for babies. A system of perpetual inventory is employed. During the six months ended 30 June 2016 the inventory activity was as follows:

1. Calculate the COGS for the six months and the closing balance of inventory, assuming:

a. LIFO

b. FIFO

c. Moving average.

2. What is the gross profit for the period, assuming:

a. LIFO?

b. FIFO?

c. Moving average?
3. Briefly describe a cost-based inventory valuation method other than LIFO, FIFO or Weighted/Moving average cost.
4. Compare the effects of LIFO and FIFO on balance sheet valuation of inventory and net profit in periods of:

a. Rising prices

b. Falling prices

5. In what circumstances will accountants depart from a cost-based valuation for inventories?

Transcribed Image Text:

Purchases January commenced business, buying 20 units at $5 per unit March 30 units at $6 per unit May 35 units at $7 per unit Sales February 15 units at $10 per unit April 30 units at $11 per unit June 30 units at $12 per unit