P$6-2$ Inventory by Three Cost Flow Methods

Obj. $4$

$5$

Details regarding the inventory of appliances on January $1,20Y7,$ purchases invoices during the year, and the inventory count on December $31,20$Y$7,$ of Amsterdam Appliances are summarized as follows:

$\backslash$table$[[$Model$,\{$

$\backslash$table$[[$Inventory$,],[$January $1]]\},$Purchases Invoices,$\backslash$table$[[$Inventory Count,$],[$December $31]]],[1$st$,2$nd$,3$rd$],[$A$10,,-,4$ at $$64,4$ at $$70,4$ at $$76,5],[$B$15,8$ at $$1,,4$ at $158,3$ at $170,6$ at $184,8],[$E$60,3$ at$,75,3$ at $65,15$ at $68,9$ at $70,4],[$G$83,7$ at $2,242,6$ at $250,5$ at $260,10$ at $259,8],[J34,12$ at $2,240,10$ at $246,16$ at $267,16$ at $270,15],[$M$90,2$ at $1,108,2$ at $110,3$ at $128,3$ at $130,5],[$Q$70,5$ at $1,160,4$ at $170,4$ at $175,7$ at $180,8]]$

Instructions

Determine the cost of the inventory on December $31,20Y7,$ by the first$-$in$,$ first$-$out method. Present data in columnar form, using the following headings:

$\backslash$table$[[$Model Quantity cost,Total cost$]]$

If the inventory of a particular model comprises one entire purchase plus a portion of another purchase acquired at a different unit cost, use a separate line for each purchase.

$2.$ Determine the cost of the inventory on December $31,20Y7,$ by the last$-$in$,$ first$-$out method, following the procedures indicated in $(1).$

$3.$ Determine the cost of the inventory on December $31,20Y7,$ by the average cost method, using the columnar headings indicated in $(1).$

$4.$ Discuss which method $($FIFO or LIFO$)$ would be preferred for income tax purposes in periods of $($a$)$ rising prices and $($b$)$ declining prices.