Question
P6-4A Sandoval Skateshop Ltd. reports the following inventory transactions for its skateboards for the month of April. The company uses a perpetual inventory system. Date
P6-4A 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 | Units | Unit Cost | Total Cost |
Apr.1 | Beginning inventory | 30 | $50 | $1,500 |
6 | Purchases | 15 | 45 | 675 |
9 | Sales | (35) | ||
14 | Purchases | 20 | 40 | 800 |
20 | Sales | (25) | ||
28 | Purchases | 20 | 35 | 700 |
Instructions
(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?
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