Stevens Stationery a well-known stationary store in town .The business maintains individual inventory records for each merchandise they are selling. The following information has been extracted from the records of Stevens Stationery about one of its popular products. There are 50 units at the beginning of October costing $ 30 each. Date Purchase Date Sales October-09 100 units @ 28 October-11 100 units @ 50 October-17 70 units @ 27 October-15 20 units @ 50 October-25 80 units @ 26 October-29 110 units @ 50

Required:

a. Determine the cost of goods sold, ending inventory and gross profit for the month ended October, assume company opts FIFO as a cost flow assumption.

b. Assume Steve has an objective to save taxes, Keeping the price trends of purchases Do you think company has opted the right cost flow assumption? Why or why not.

c.Assume the value of ending inventory is mistakenly overstated by $ 500, how this error effects (over or understates) the following for the period

I.Cost of goods sold

II.Gross profit

d.Equity.Can we apply the idea of inventory shrinkage in this company? If yes record the inventory shrinkage assume a physical count indicates there are 80 units on hand on October 31.