Problem:
Wave Riders Surfboard Company began business on January 1 of the current year. Purchases of surfboards were as follows:
|
1/3:
|
100 boards @ $125
|
|
3/17:
|
50 boards @ $130
|
|
5/9:
|
246 boards @ $140
|
|
7/3:
|
400 boards @ $150
|
|
10/23:
|
74 boards @ $160
|
Wave Riders sold 710 boards at an average price of $250 per board. The company uses a periodic inventory system.
Instructions
a. Calculate cost of goods sold, ending inventory, and gross profit under each of the following inventory valuation methods:
- First-in, first-out
- Last-in, first-out
- Weighted 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?