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Cost of Goods in a Perpetual System

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Comparing cost of goods sold in a perpetual system?FIFO, LIFO, and average-cost methods

Assume that a JR Tire Store completed the following perpetual inventory transactions for a line of tires:

Beginning inventory 16 tires @ $ 65
Purchase 10 tires @ $ 78
Sale 12 tires @ $ 90

1.Compute cost of goods sold and gross profit using FIFO.
2.Compute cost of goods sold and gross profit using LIFO.
3.Compute cost of goods sold and gross profit using averagecost. (Round average cost per unit to the nearest cent and all other amounts to the nearest dollar.)
4.Which method results in the largest gross profit and why?

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Solution Summary

This solution contains step-by-step calculations in an Excel file to determine the cost of goods sold, gross profit, and which methods are most appropriate.

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