Question

Gladstone Company tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31.

Transactions		Units			Unit Cost
Beginning inventory, January 1			2,800		$	60
Transactions during the year:
a.	Purchase, January 30		4,250			74
b.	Sale, March 14 ($100 each)		(2,450	)
c.	Purchase, May 1		2,950			90
d.	Sale, August 31 ($100 each)		(2,900	)

Assuming that for Specific identification method (item 1d) the March 14 sale was selected two-fifths from the beginning inventory and three-fifths from the purchase of January 30. Assume that the sale of August 31 was selected from the remainder of the beginning inventory, with the balance from the purchase of May 1.

Required:
1.	Compute the amount of goods available for sale, ending inventory, and cost of goods sold at December 31 under each of the following inventory costing methods: (Round intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.)

        

2-a.	Of the four methods, which will result in the highest gross profit?
	Last-in, first-out Weighted average cost First-in, first-out Specific identification

2-b.	Of the four methods, which will result in the lowest income taxes?
	Last-in, first-out Weighted average cost First-in, first-out Specific identification

Answer 1

Periodic Inventory System Goods Available for Sales Jan-01 inventory Jan-30 Purchases May-01 Purchase Unitsunit Cost Total Cost 60168000 74 314500 90 265500 748000 2800 4250 2950 10000 Goods Available for Sales Units issued (LIFO) Last in First out Mar-14Last inventory 2450 500 2400 5350 4650 90 220500 45000 74 177600 443100 304900 Aug-31 90 Cost of Goods Sold Cost of Ending Inventory

Units issued (Weighted Average) Mar-14 Aug-31 Cost of Goods Sold Cost of Ending Inventoi 5350 74.80 400180 400180 465074.80 347820 5350 Units issued (FIFO Mar-14First Aug-31 next 2450 350 2550 5350 4650 60147000 21000 74 188700 356700 391300 60 Cost of Goods Sold Cost of Ending Inventoi Units issued (specific Identification Mar-14 First 980 1470 1820 1080 5350 4650 58800 74 108780 60109200 97200 373980 374020 60 Aug-31 90 Cost of Goods Sold Cost of Ending Inventoi

1) compute the goods Available for sales ,Ending inventory, Cost of Goods sold Amount of Goods Ending Cost of Goods Available for Sales Inventory Sold a. b. C. Last-in-First -out Weighted Average First-in First-out 748000 304900 748000 347820 748000391300 748000 374020 443100 400180 356700 373980 d.Specific Identification 2)Which method will results in the Higest Gross Profit Answer FIFO (First in First Out) 3)Which method will results in the lowest income taxes? Answer Last in First out