QUESTION 1 (25 marks) QUESTION 1: Perpetual Inventory System- LIFO, FIFO AND AVCO. Overton Company uses a perpetual inventory system for its single product. Its beginning inventory, purchases and sales during calendar year 2021 follow. Date Activity Units Acquired at Cost Units Sold at Retail Unit Inventory Jan 1 Beg. Inventory 400 units @ $14 = $ 5,600 400 units Jan 15 Sale 200 units @ $ 30 200 units March 10 Purchase 200 units @ $ 15 = $ 3,000 400 units April 1 Sale 200 units @ $ 30 200 units May 9 Purchase 300 units @ $ 16 = $ 4,800 500 units Sept 22 Purchase 250 units @ $ 20 = $ 5,000 750 units Nov 1 Sale 300 units @ $35 450 units Nov 28 Purchase 100 units @ $ 21 550 units Totals 1,250 units 20,500 $ 700 units Required 1. Calculate the cost of goods available for sale. (3 marks) 2. Calculate (a) ending inventory and (b) Cost of goods sold under the LIFO and AVCO inventory costing methods. (10 marks) 3. Given that expenses after gross profit totalled $5,000.00, compute the gross and net profit earned by the company under the LIFO and AVCO costing methods. (2 marks) 4. If the company had used the FIFO inventory costing method, cost of goods sold under FIFO would have been $ 10,200.00. Management wants a report that shows how changing from FIFO to another method would change net income. Prepare a table showing (1) the amount by which cost of goods sold under LIFO and AVCO is different from the FIFO cost of goods sold and (2) the effect on net income when LIFO and AVCO are used instead of FIFO. (6 marks) 5. When costs are rising, what is the effect of the FIFO inventory valuation approach on cost of goods sold, gross profit and net income? Why? (4 marks)