(Calculating cost of sales and ending inventory using average cost, FIFO, and LIFO cost flow assumptions when prices are stable, LO 1, 2) The following information is provided for Exlou Ltd. (Exlou):

Required:

a. Calculate ending inventory on December 31, 2004 and 2005 and cost of sales and gross margin for the years ended December 31, 2004 and 2005 for Exlou using FIFO, LIFO, and average cost. Assume that Exlou uses a periodic inventory system.

b. Explain the results you obtained in (a). Do you find anything unusual about the amounts you calculated for ending inventory, cost of sales, and gross margin under each of the cost flow assumptions?

c. Would your results be any different if Exlou used a perpetual inventory control system? Explain.

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Number Purchase price Selling price of units per unit Inventory on hand on January 1, 2004 10,000 $10 Inventory purchases during 2004 40,000 $10 Inventory purchases during 2005 50,000 $10 Sales during 2004 Sales during 2005 38,000 54,000 per unit $22 $22