u pun horsepower outboard motor--the Apollo 400. During the current year. SK purchased ciehid rine equipment to power boal owners. Apollo Outboard recently introduced the world's first 48 Problems 85 and 8.6 are based on the following data: SK Marine sells high-performance these motors--all inicnded for resale to customers-at the following dates and acquisition on Units Purchased 2 Unit Cost Purchase Date July 1 July 22 Aug. 3 ile $4.450 4.600 4.700 Total Com $ 8,900 13,800 14.100 $36.800 Available for sale during the year On July 2x, SK sold four of these motor to Mr. G Racing Associates. The other lorton mained in inventory at September 30. the end of ski fiscal year. Hous Assume char SK uses a perpetual inventory systent. (See the data on the previous page.) Instructions Compute (a) the cost of goods sold relating to the sale on July 28 and (b) the ending inven- tory of Apollo outboard motors at September 30, using each of the following Now assump- PROBLEM 8.5 Alternative Row Assumpti LO 1 tions: 1. Average cost 2 FIFO 1. LIFO Show the number of units and the unit costs of each cost layer comprising the cost of goods sold and the ending inventory. a in part 2, you have determined Sk's cost of Apollo motors sold using three different inven- tory flow assumptions. 1. Which of these methods will result in SK Marine reporting the highest net income for the current year? Would this always be the case? Explain. 2 Which of these methods will minimize the income taxes owed by SK for the year? Would you expect this usually to be the case? Explain. 3. May SK use the method resulting in the highest net income in its financial statements and one that minimizes taxable income in its income tax retums? Explain. Assume that SK Marinc uses a periodic inventory system. (See the data preceding Problem 8.5.) PROBLEM 8.6 Periodic Costing Procedur Instructions Compute the ending inventory of Apollo motors at September 30 and the cost of goods sold LO 4 through this date under cach of the following periodic costing procedures. Show the number of units and the unit costs in each cost layer of the ending inventory. (You may determine the cost of goods sold by deducting ending inventory from the cost of goods available for sale.) Average cost FIFO CLIFO If Apollo uses the LIFO method for financial reporting purposes, can it use the FIFO method for income tax purposes? Explain