The following data pertains to On-Target Investment Accounting software packages in the inventory of Computer Program On-Target Outlets:

Inventory, January 1____________220 units at $117

Purchases:

May 10..................................160 units at $115

August 18..............................230 units at $114

October 1...............................220 units at $115

Inventory, December 31........................228 units

INSTRUCTIONS

1. Determine the cost of the inventory on December 31 and the cost of goods sold for the year ending on that date under each of the following valuation methods:

(a) FIFO,

(b) LIFO, and

(c) Average cost. When using the average cost method, compute the unit cost to the nearest cent.

2. Assume that the replacement cost of each unit on December 31 is $115.25. Using the lower of cost or market rule, find the inventory amount under each of the methods given in instruction 1.

Analyze:

What is the difference between the cost and market value of the inventory using the LIFO method?