Question
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
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:
Units | Unit Cost | Cost | ||
---|---|---|---|---|
Beginning Inventory | 1,000 | $21 | $21,000 | |
Purchases: | #1 | 1,800 | 23 | 41,400 |
#2 | 800 | 27 | 21,600 | |
#3 | 1,200 | 30 | 36,000 |
During the current period, Chen sold 2,800 units. a. Assume that Chen uses the first-in, first-out method. Compute its cost of goods sold for the current period and the ending inventory balance.
Cost of Goods Sold | Answer | |
Ending Inventory | Answer |
b. Assume that Chen uses the last-in, first-out method. Compute its cost of goods sold for the current period and the ending inventory balance.
Cost of Goods Sold | Answer | |
Ending Inventory | Answer |
c. Assume that Chen uses the average cost method. Compute its cost of goods sold for the current period and the ending inventory balance.
Cost of Goods Sold | Answer | |
Ending Inventory | Answer |
d. Which of these three inventory costing methods would you choose to (assume a period of rising prices): 1. Reflect what is probably the physical flow of goods? AnswerAverage costFIFOLIFO 2. Minimize income taxes for the period? AnswerAverage costFIFOLIFO 3. Report the largest amount of income for the period? AnswerAverage costFIFOLIFO
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