Question #3

Dockers Inc. beginning inventory and purchases during the year ended December 31, 2019 were as follows:

Required:

a) Determine the cost of inventory on December 31, 2019 using the perpetual inventory system under each of the following inventory costing methods:

i) First in, first-out

ii) Last in, first-out

iii) Average inventory valuation

b) Assume that during the fiscal year, ended December 31, 2019 net sales were $ 8,000 determine gross profit for each of the above methods.

c) Explain why ending inventory and cost of goods sold differ under the three methods of inventory valuation.

Date Inventory: January 1 Purchases: March 10 August 30 November 26 Sales: June 25 October 5 Units Unit Cost 600 units @ $10 1000 units @ $11 900 units @ $12 700 units @ $14 800 units 1100 units Total Cost $ 6,000 11,000 10,800 9,800