You have the following information for Petrol Plus. Petrol Plus uses the periodic method of accounting for its inventory transactions.

March 1 _ Beginning inventory 1,200 litres at a cost of 40¢ per litre.

March 3 _ Purchased 2,000 litres at a cost of 45¢ per litre.

March 5_ Sold 1,500 litres for 60¢ per litre.

March 10 Purchased 3,700 litres at a cost of 49¢ per litre.

March 20 Purchased 2,000 litres at a cost of 55¢ per litre.

March 30 Sold 5,000 litres for 70¢ per litre.

Instructions

(a) Prepare partial income statements through gross profit, and calculate the value of ending inventory that would be reported on the balance sheet, under each of the following cost flow assumptions.

(1) Specific identification method assuming:

(i) the March 5 sale consisted of 700 litres from the March 1 beginning inventory and 800 litres from the March 3 purchase; and

(ii) the March 30 sale consisted of the following number of units sold from each purchase: 400 litres from March 1; 500 litres from March 3; 2,600 litres from March 10; 1,500 litres from March 20.

(2) FIFO.

(3) LIFO.

(b) How can companies use a cost flow method to justify price increases? Which cost flow method would best support an argument to increase prices?