Question 1 (Inventory Valuation / 25 marks)

ABC Company has the following merchandise inventory information:

Beginning inventory: 200 units @ $80 per unit.

January 20: Purchase 100 units @$90 per unit.

March 15: Purchase 150 units @$100 per unit.

June 8: Purchase 300 units.

August 4: Purchase 200 units @$120 per unit.

500 units sold in the fourth quarter for $150 per unit.

* The company is using FIFO method

Required:

(a) If the gross profit for the year is $29,750, what are the values of (1) beginning inventory, (2) COGS, (3) unit purchase price on June 8, (4) ending inventory (12 marks)

(b) If the company switches to use Average Cost method, what are the values of (1) COGS, (2) Gross Profit, (3) ending inventory

* The unit average cost should be rounded to one decimal place (6 marks)

(c) What are the effects of this switching from FIFO to Average-cost and why? What accounting principle need to be observed by the company in this matter? (7 marks)