Belkin Corporation is a wholesale company which sells hair care shampoos to beauty parlors and uses a perpetual inventory system. This company is located in Chicago, U.S.A. and therefore, is allowed to evaluate its COGS by the LIFO system. Jack Jones, the CFO of Belkin Co. Is still deciding which method of inventory valuation to use, being that the products they sell are all identical. Purchases and sales for the first two months of the year are as the follows:

Jan. 1 Jan. 2 Jan.10 Feb. 5 Feb.18

Beginning balance 100 units at $4 each $400

Purchased 20 units at $5 each Purchased 15 units at $6 each Purchased 50 units at $7 each Purchased 26 units at $7.50 each $195

$100 $ 90 $350

On February 10 the company sold 130 units to one of its important clients. Mr. Jones would like you to assist him in calculating the following under the three cost Flow assumptions FIFO, LIFO and Average method.

1. Compute COGS at the date of the sale and the ending inventory on February 28th under each of the methods indicated above. (36 points)

2. Indicate under which method the company would pay less taxes. (3 points)

3. Indicate under which method the company obtains the highest profit. (3 points)

4. Can the company report in the financial statements using FIFO and use LIFO for reporting taxes? (3 point)