E7-8 (Algo) Analyzing and Interpreting the Financial Statement Effects of Periodic FIFO, LIFO, and Weighted Average Cost [LO 7-3]

Orion Iron Corporation tracks the number of units purchased and sold throughout each year but applies its inventory costing method at the end of the year, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31.

Transactions	Units	Unit Cost
a. Inventory, Beginning	250	$ 10
For the year:
b. Purchase, April 11	600	12
c. Purchase, June 1	400	12
d. Sale, May 1 (sold for $45 per unit)	250
e. Sale, July 3 (sold for $45 per unit)	350
f. Operating expenses (excluding income tax expense), $18,800

Required:

1. 1. Calculate the number and cost of goods available for sale.
2. 2. Calculate the number of units in ending inventory.
3. 3. Compute the cost of ending inventory and cost of goods sold under (a) FIFO, (b) LIFO, and (c) weighted average cost.
4. 4. Prepare an income statement that shows under the FIFO method, LIFO method and weighted average method.
5. 6. Which inventory costing method minimizes income taxes?