ACCOUNTING-Inventory valuation methods: computations and concepts.

QUESTION

4. Inventory valuation methods: computations and concepts.Wild Riders Surfboard Company began business on January 1 of the current year. Purchases of surfboards were as follows:DateQuantityUnit CostTotal Cost1/3100$125$12,5004/3200$135$27,0006/3100$145$14,5007/3100$155$15,500Total500$69,500Wild Riders sold 400 boards at $250 per board on the dates listed below. The company uses a perpetual inventory system.DateQuantity SoldUnit PriceTotal Sales3/1750$250$12,5005/1775$250$18,7508/10275$250$68,750Total400$100,000InstructionsCalculate cost of goods sold, ending inventory, and gross profit under each of the following inventory valuation methods:First-in, first-outLast-in, first-outWeighted average b. Which of the three methods would be chosen if management’s goal is to(1) produce an up-to-date inventory valuation on the balance sheet?(2) show the lowest net income for tax purposes?

ANSWER:

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