P6-4 A Sandoval Skateshop Ltd. reports the following inventory transactions for its skateboards for the month of April. The company uses a perpetual inventory system.

Date Explanation Unit Unit Price Total Cost

Apr. 1 Beginning inventory 30 $45 $1,350

6 Purchase 15 44 660

9 Sales (35)

14 Purchases 20 43 860

20 Sales (25)

28 Purchases 20 37 740

Instruction:

(a) Determine the cost of goods sold and cost of ending inventory using FIFO.

(b) Assume that Sandoval wants to change to the average cost formula. What guidelines must it consider before making this change?

(c) If the company does change to the average cost formula and prices continue to fall, would you expect the cost of goods sold and ending inventory amounts to be higher or lower than these amounts when using FIFO?