Jim has recently opened a dry fruits wholesale company dedicated to the sale of peanuts, almonds and pistachios. During its first month of activity, the company has made the following transactions:

Jims accountant recommended that he should use the average cost method in order to determine the cost of the inventory sold but he is not sure about the consequences it may have on his financial situation. Relying on your accounting knowledge, Jim asks you the following questions:

Why in your opinion did Jims accountant recommend the average cost method and what difference is there with the three other methods? Explain the main characteristics of each method of valuation of the inventory and the consequences they may have on the valuation of the inventory and determination of the net income in case of price fluctuation.

2: Prepare an Income statement of the company at the end of February using as method of valuation of the inventory the average cost method, FIFO, and LIFO for each one of the products sold by Jim, and calculate the balance of the inventory at the end of the month. Explain the calculations. the required explanation for every calculation step

February 1: Purchase of Pistachios: Purchase of Almonds: Purchase of Peanuts: KE 2500 4000 6000 Price per kg $11 $6 $4 Amount $27,500 $24,000 $24,000 February 2: Purchase of Pistachios: Purchase of Almonds: Purchas of Peanuts: 1500 2000 2000 $13 $7 $5 $19,500 $14,000 $10,000 February 4: Sold to several clients: Pistachios: Almonds: Peanuts: 2000 2500 3000 $21 $12 $8 $42,000 $30,000 $24,000 February 5: Sold to Fruits Lovers Inc.: Pistachios: Almonds: Peanuts: 500 1000 1500 $21 $12 $9 $10,500 $12,000 $13,500 1500 2000 $15 $9 $22,500 $18,000 February 11 Purchase of Pistachios: Purchase of almonds: February 12: Sale of peanuts to Peanuts Lovers Inc.: February 13: Purchase of Peanuts 3500 $9 $31,500 6000 $5 $30,000 February 18: Sold to several clients: Pistachios: Almonds: Peanuts: 1000 1500 3000 $22 $14 $10 $22,000 $21,000 $30,000 February 24: Purchased from various suppliers: Pistachios: Almonds: Peanuts: 1000 1000 1000 $14 $10 $5 $14,000 $10,000 $5,000 Besides these transactions, the company has had the following expenses: Salaries: $3600 Electricity bill: $350 Renting of equipment: $900 Rent of warehouse and office: $1.600 Miscellaneous: $1.300