Toffler Auto Parts uses the perpetual inventory system for the purchase and sale of inventory and had the following information available on November 30, 2014:

Required
1. Calculate the cost of goods sold and the cost of the ending inventory for November under each of the following inventory costing methods:
(a) Moving-weighted-average cost,
(b) FIFO cost.
2. Prepare the journal entries required to record the transactions using the perpetual inventory system with FIFO costing.
3. An internal audit has discovered that a new employee-an accounting clerk-had been stealing merchandise and covering up the shortage by changing the inventory records. For example, if 120 units were purchased at $40 per unit, he would record it as 100 units purchased at $48 per unit and then steal the other 20 units.
The external auditors examined the accounting records prior to the employment of the individual and noted that the company has an average gross margin rate of 40 percent. They estimate that 95 percent of the incorrectly costed units have been sold.
Use the gross margin method to estimate the cost of the inventory shortage (under the FIFO costing method) and give the journal entry required to correct it.
4. What would be the effect on the net income for the year ending November 30, 2014, if the inventory shortage had not been discovered? For the year ending November 30, 2015?

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Cost or Selling Price per Unit Purchases and Sales Number of Units 3,900 6,000 4,500 7,500 Nov. 1 Balance of inventory $40 56 7 Purchased 8 Sold 12 Purchased 16 Sold 76 52 84 52 9,000 4,500 10,500 13,500 21 Purchased Purchased 25 48 Sold 29 84