Gladstone Company tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, 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
Beginning inventory, January 1			1,500		$	60
Transactions during the year:
a.	Purchase, January 30		2,600			72
b.	Sale, March 14 ($100 each)		(1,150	)
c.	Purchase, May 1		1,300			90
d.	Sale, August 31 ($100 each)		(1,600	)

Assuming that for Specific identification method (item 1d) the March 14 sale was selected two-fifths from the beginning inventory and three-fifths from the purchase of January 30. Assume that the sale of August 31 was selected from the remainder of the beginning inventory, with the balance from the purchase of May 1.

Required:
1.	Compute the amount of goods available for sale, ending inventory, and cost of goods sold at December 31 under each of the following inventory costing methods: (Round intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.)

2-a.

Of the four methods, which will result in the highest gross profit?

	Last-in, first-out
	Weighted average cost
	First-in, first-out
	Specific identification

2-b.

Of the four methods, which will result in the lowest income taxes?

	Last-in, first-out
	Weighted average cost
	First-in, first-out
	Specific identification

Part 2)

Springer Anderson Gymnastics prepared its annual financial statements dated December 31. The company used the FIFO inventory costing method, but it failed to apply LCM to the ending inventory. The preliminary income statement follows:

Sales Revenue				$	160,000
Cost of Goods Sold
Beginning Inventory	$	20,000
Purchases		101,000
Goods Available for Sale		121,000
Ending Inventory (FIFO cost)		38,140
Cost of Goods Sold					82,860
Gross Profit					77,140
Operating Expenses					36,000
Income from Operations					41,140
Income Tax Expense (20%)					8,228
Net Income				$	32,912

Assume that you have been asked to restate the financial statements to incorporate LCM. You have developed the following data relating to the ending inventory:

				Purchase Cost						Market Value per Unit
Item	Quantity			Per Unit			Total
A		2,000		$	4.00		$	8,000		$	5.00
B		800			5.80			4,640			2.90
C		4,500			3.00			13,500			1.45
D		2,000			6.00			12,000			4.00
							$	38,140

Required:
1.	Restate the income statement to reflect LCM valuation of the ending inventory. Apply LCM on an item-by-item basis.

2.	Compare the LCM effect on each amount that was changed in requirement 1. (Decreases should be indicated by a minus sign.)