PB7-1 (Algo) Analyzing the Effects of Three Alternative Inventory Methods in a Periodic Inventory System [LO 7-3]

Mojo Industries 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 accounting period, January 31. The inventorys selling price is $11 per unit.

Transactions	Unit Cost	Units	Total Cost
Inventory, January 1	$ 3.50	260	$ 910
Sale, January 10		(200)
Purchase, January 12	4.00	310	1,240
Sale, January 17		(100)
Purchase, January 26	5.00	55	275

Required:

1. Compute the amount of goods available for sale, ending inventory, and cost of goods sold at January 31 under each of the following inventory costing methods: a. First-in, first-out. b. Last-in, first-out. c. Specific identification, assuming that the January 10 sale was from the beginning inventory and the January 17 sale was from the January 12 purchase.

2-a. Of the three methods, which will result in the highest gross profit? 2-b. Of the three methods, which will result in the lowest income taxes?