At the end of January 2012, the records of Regina Company showed the following for a particular item that sold at \(\$ 18\) per unit:

Required:
1. Assuming the use of a perpetual inventory system, prepare a summarized statement through gross profit on sales under each of the following inventory costing methods:

(a) weightedaverage cost,

(b) FIFO, and

(c) specific identification, assuming that the company is permitted to use this method. For specific identification, assume that the first sale was out of the beginning inventory and the second sale was out of the January 12 purchase. Show the inventory computations in detail.
2. Which method would result in

a. the highest pretax profit?

b. the lowest income tax expense?

c. the more favourable cash flow? Explain.
3. Prepare journal entries to record the transactions that occurred in January 2012, assuming that FIFO is used for inventory costing.

Transcribed Image Text:

Transactions Units Amount Inventory, January 1, 2012 500 $2,500 Sale, January 10 (400) Purchase, January 12 600 3,600 Sale, January 17 (300) Purchase, January 26 160 1,280