At the beginning of the current period, Chen carried 1,000 units of its product with a unit cost of \(\$ 21\). A summary of purchases during the current period follows:

During the current period, Chen sold 2,800 units.

a. Assume that Chen uses the first-in, first-out method. Compute both cost of goods sold for the current period and the ending inventory balance. Use the financial statement effects template to record cost of goods sold for the period.

b. Assume that Chen uses the last-in, first-out method. Compute both cost of goods sold for the current period and the ending inventory balance.

c. Assume that Chen uses the average cost method. Compute both cost of goods sold for the current period and the ending inventory balance.

d. Which of these three inventory costing methods would you choose to:
1. Reflect what is probably the physical flow of goods? Explain.
2. Minimize income taxes for the period? Explain.
3. Report the largest amount of income for the period? Explain.

Transcribed Image Text:

Beginning Inventory..... Purchases: #1...... #2. # 3.... 800 1,200 Units 1,000 1,800 27 30 Unit Cost $21 23 21,600 36,000 Cost $21,000 41,400