Three Forks Appliances uses the periodic inventory system. Details regarding the inventory of appliances at May 1, 2005, purchases invoices during the year, and the inventory count at April 30, 2006, are summarized follows.

Instructions
1. Determine the cost of the inventory on April 30, 2006, by the first-in, first-out method.
Present data in columnar form, using the following headings:
Model Quantity Unit Cost Total Cost
If the inventory of a particular model comprises one entire purchase plus a portion of another purchase acquired at a different unit cost, use a separate line for each purchase.
2. Determine the cost of the inventory on April 30, 2006, by the last-in, first-out method, following the procedures indicated in (1).
3. Determine the cost of the inventory on April 30, 2006, by the average cost method, using the columnar headings indicated in (1).
4. Discuss which method (FIFO or LIFO) would be preferred for income tax purposes in periods of
(a) Rising prices and
(b) Decliningprices.

Transcribed Image Text:

Purchase Invoices 2nd 4 at $271 8 at 89 3 at 128 3 at 85 5 at 260 4 at 175 4 at 200 Inventory May 1 Inventory Count, April 30 2 1st 2 at $250 2 at $260 BH43 6 at 80 5 at 82 2 at 108 2 at 110 8 at 88 4 at 79 PM18 7 at 242 6 at 250 5 at 160 4 at 170 4 at 150 3rd 4 at $272 8 at 90 3 at 130 6 at 92 10 at 259 7 at 180 4 at 202 2 K243 Q661