P6-2A Breathless Distribution markets CDs of the performing artist Christina Spears. At the beginning of October, Breathless had in beginning inventory 1,000 Spears CDs with a unit cost of $5. During October Breathless made the following purchases of Spears CDs.
Oct. 3 3,500 @ $6 Oct. 19 2,000 @ $8
Oct. 9 4,000 @ $7 Oct. 25 2,000 @ $9
During October 10,000 units were sold. Breathless uses a periodic inventory system.
(a) Determine the cost of goods available for sale.
(b) Determine (1) the ending inventory and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average cost). Prove the accuracy of the cost of goods sold under the FIFO and LIFO methods.
(c) Which cost flow method results in (1) the highest inventory amount for the balance sheet and (2) the highest cost of goods sold for the income statement?
(b)(2) Cost of goods sold:
Which cost flow method results in (1) the highest inventory amount for the ...
The solution shows the steps of valuing inventory and cost of goods sold under various methods such as LIFO and FIFO and which cost flow method would be best for highest inventory and highest cost of goods sold.