Capstone Consolidated, Inc. is a leading manufacturer of steel products. The following inventory data relates to the firm’s production during the first quarter of 2015:

At the end of the first quarter of 2015, Capstone’s internal auditors determined that 1,700 tons of raw steel had been processed and sold.
Reuired
1. Calculate the cost of steel processed and sold during the quarter under each of the following methods, assuming use of a periodic inventory management system:

a. EIFO

b. LIFE

c. Weighted-average

2. Assume that the replacement cost per ton is \($39\) at the end of the quarter. What amount should Capstone’s nding inventory be valued at on its March 31 balance sheet under each of the following methods?

a. FIFO

b. LIFO

c. Weighted-average 3. Which method—FIFO, LIFO, or the weighted-average cost method—should Capstone use for reporting its financial results to its shareholders? Why? How does this decision constrain the company’s method choice for income tax reporting?

Transcribed Image Text:

Date of Purchase Tons of Raw Steel Purchased Purchase Price Total per Ton Cost Jan. 1 Jan. 15 Feb. 7 500 $40 $20,000 700 35 24,500 200 33 6,600 Feb. 21 450 30 13,500 March 15 350 42 14,700 2,200 $79,300