Sheepskin Company sells to colleges and universities a special paper that is used for diplomas. Sheepskin typically makes one purchase of the special paper each year on January 1. Assume that Sheepskin uses a perpetual inventory system. You have the following data for the 3 years ending in 2019:
2017
Beginning inventory ................ 0 pages
Purchases ............................ 10,000 pages at $1.60 per page
Sales .................................. 8,500 pages
2018
Beginning inventory .............. 1,500 pages
Purchases ........................... 16,200 pages at $2.00 per page
Sales ................................. 15,000 pages
2019
Beginning inventory ............... 2,700 pages
Purchases ........................... 18,000 pages at $2.50 per page
Sales ................................. 20,100 pages
Required:
1. What would the ending inventory and cost of goods sold be for each year if FIFO is used?
2. What would the ending inventory and cost of goods sold be for each year if LIFO is used?
3. For each year, explain the cause of the differences in cost of goods sold under FIFO and LIFO.