Choice of Inventory Costing Methods Best Co.

recorded the following inventory transactions during 2001:

a. Calculate cost of goods sold and gross profit for Best Co.
for 2001 assuming Best uses a first-in, first-out cost-flow assumption.

b. Calculate cost of goods sold and gross profit for Best Co.
for 2001 assuming Best uses a last-in, first-out cost-flow assumption.

c. Which of the two methods provides the most conservative estimate of the carrying value of inventory? Which provides the best estimate of the current cost of replacing the inventory? Explain your answers.

d. Which method provides the most conservative estimate of reported income? Under what circumstances would the opposite be true?

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Unit Unit Number of Purchase Sale Units Price Price Inventory balance January 1, 2001 75 $5 Purchase 150 $6 Sale 100 $15 Purchase 50 $8 Purchase 80 $7 Sale 160 $16