Speed World Cycles sells high-performance motorcycles and motocross racers. One of Speed Worlds most popular models is the Kazomma 900 dirt bike. During the current year, Speed World Cycles purchased eight of these bikes at the following costs:

Purchase Date	Unit Purchased	Unit Cost		Total Cost
July 1	2	$	4,950	$	9,900
July 22	3		5,000		15,000
Aug 3	3		5,100		15,300
	8			$	40,200

On July 28, Speed World Cycles sold four Kazomma 900 dirt bikes to the Vince Wilson racing team. The remaining four bikes remained in inventory at September 30, the end of Speed Worlds fiscal year.

Assume that Speed World Cycles uses a perpetual inventory system.

a-1.	Compute the cost of goods sold relating to the sale on July 28 and the ending inventory of Kazomma 900 dirt bikes at September 30, using Average cost.

Cost of goods sold
Ending inventory

a-2.	Compute the cost of goods sold relating to the sale on July 28 and the ending inventory of Kazomma 900 dirt bikes at September 30, using FIFO method.

Cost of goods sold
Ending inventory

a-3.	Compute the cost of goods sold relating to the sale on July 28 and the ending inventory of Kazomma 900 dirt bikes at September 30, using LIFO method.

Cost of goods sold
Ending inventory

b-1.

Which of the three cost flow assumptions will result in Speed World Cycles reporting the highest net income for the current year?

	FIFO
	LIFO
	Average cost

b-2.

Which of the three cost flow assumptions minimizes the income taxes owed by Speed World Cycles for the year?

	FIFO
	LIFO
	Average cost

b-3.

May Speed World Cycles use the cost flow assumption that results in the highest net income for the current year in its financial statements, but use the cost flow assumption that minimizes taxable income for the current year in its income tax return?

	Yes
	No