1 10 points P7-3 Comparing and Contrasting the Effects of Inventory Costing Methods on Financial Statement Elements LO7-2, 7-3 Neverstop Corporation sells item A as part of its product line. Information about the beginning inventory, purchases, and sales of item A are given in the following table for the first six months of the current year. The company uses a perpetual inventory system: Date January 1 (beginning inventory) January 24 February 8 March 16 June 11 Purchases Sales Number of Units 565 Unit Cost $3.80 Number of Units Sales Price $5.30 665 $3.90 365 $5.30 665 $3.90 Required: 1. Compute the cost of ending inventory by using the weighted-average costing method. (Do not round Intermediate calculations and round the final answer to 2 decimal places.) Answer is complete but not entirely correct. Ending inventory $ 3,416.00 2. Compute the gross profit for the first six months of the current year by using the FIFO costing method. (Do not round Intermediate calculations and round the final answer to 2 decimal places.) Answer is complete but not entirely correct. Gross profit $4,576.00 3. Would the gross profit be higher, lower, or the same if Neverstop used the weighted-average costing method rather than the FIFO method? Lower Higher Remain the same 4. Prepare journal entries to record the purchase and sale transactions, as well as the cost of sales, assuming that all sales and purchase transactions are on account and that the weighted-average method is used. (Do not round Intermediate calculations and round the final answers to 2 decimal places. If no entry is required for a transaction/event, select "No journal entry required" In the first account field.) Answer is not complete. No General Journal 1 January 24 Accounts receivable Sales 2 January 24 Cost of sales Inventory 3 February 08 Inventory Accounts payable 4 March 16 Accounts receivable Sales 5 March 16 Cost of sales Inventory 6 June 11 Inventory Accounts payable 00 00 00 00 00 00 Debit Credit Assume that because of a clerical error, the ending inventory is reported to be 1,065 units rather than the actual number of units (1,165) on hand. 5a. If FIFO is used, calculate the amount of the understatement or overstatement in the cost of sales for the first six months of the current year. Answer is complete but not entirely correct. Overstatement of cost of sales $ 365 x 5b. If FIFO is used, calculate the amount of the understatement or overstatement in the current assets at June 30 of the current year. Answer is complete but not entirely correct. Understatement of current assets S 480