5. I have recently started a new retail business. I am buying toast machines from China and selling them to my family and friends. I am using a periodic inventory system and now must choose a cost flow assumption for my company.

The following transactions occur within the month of March.

March. 2 I have purchased 10 toast machines on account from my Chinese supplier for $1,100 ($110 each), FOB destination, terms 2/13 n/30.

13 I have sold one of them to my second cousin once removed $250 cash.

13 I have two of them to my roommates father $500 cash.

15 I have paid the amount owed to my Chinese supplier.

22 I have purchased 5 toast machines on account from my Chinese supplier for

$625($125 each),, FOB destination, terms 3/10 n/30.

28 I have sold 7 of them to my office mates $1,750 cash. 28 I have paid the amount owed to my Chinese supplier.

30 I have purchased 8 toast machines on account from my Chinese supplier for $1,104 ($138 each), FOB destination, terms n/30.

30 I have sold 5 of them to my graduate students $1,250 cash.

Instructions

a. Record the months transactions in the appropriate journalsales, purchases, cash receipts, cash payments, and general. (Use perpetual inventory approach)

b. Determine the cost of goods available for sale. (Use periodic inventory approach)

c. Calculate (i) ending inventory, (ii) cost of goods sold, (iii) gross profit, and (iv) gross profit rate under each of the following methods: LIFO, FIFO, and average cost. (Use periodic inventory approach)

d. Which cost flow assumption should I choose?