a. Determine the cost of the inventory on December 31, 2010, by the first-in, fi

Question

a. Determine the cost of the inventory on December 31, 2010, by the first-in, first-out method.

If the inventory of a particular model comprises one entire purchase plus a portion of another purchase acquired at a different unit cost, use a separate line for each purchase.

b. Determine the cost of the inventory on December 31, 2010, by the last-in, first-out method.

If the inventory of a particular model comprises one entire purchase plus a portion of another purchase acquired at a different unit cost, use a separate line for each purchase.

c. Determine the cost of the inventory on December 31, 2010, by the average cost method.

If the inventory of a particular model comprises one entire purchase plus a portion of another purchase acquired at a different unit cost, use a separate line for each purchase.

d. Discuss which method (FIFO or LIFO) would be preferred for income tax purposes in periods of (a) rising prices and (b) declining prices.

First-In, First-Out Method Model Quantity Unit Cost Total Cost BB900 $ $ BB900 C911 C911 L100 N201 N201 Q73 Q73 Z120 ZZRF Total $

Explanation / Answer

First-In, First-Out Method Model Quantity Unit Cost Total Cost BB900 12 $222 $2664 BB900 18 225 4050 C911 2 65 130 C911 2 70 140 L100 4 317 1268 N201 2 530 1060 N201 2 535 1070 Q73 1 549 549 Q73 6 542 3252 Z120 2 232 464 ZZRF 12 78 936 Total $15,583 b. Determine the cost of the inventory on December 31, 2010, by the last-in, first-out method. If the inventory of a particular model comprises one entire purchase plus a portion of another purchase acquired at a different unit cost, use a separate line for each purchase. Last-In, First-Out Method Model Quantity Unit Cost Total Cost BB900 27 $213 $5,751 BB900 3 215 645 C911 4 60 240 L100 4 305 1220 N201 2 520 1040 N201 2 527 1054 Q73 6 520 3120 Q73 1 531 531 Z120 2 222 444 ZZRF 8 70 560 4 72 288 Total $ 14,893 c. Determine the cost of the inventory on December 31, 2010, by the average cost method. If the inventory of a particular model comprises one entire purchase plus a portion of another purchase acquired at a different unit cost, use a separate line for each purchase. Average Cost Method Model Quantity Unit Cost Total Cost BB900 30 $218 $6540 C911 4 63 252 L100 4 311 1244 N201 4 528 2112 Q73 7 534 3738 Z120 2 227 454 ZZRF 12 74 888 Total $15,228 d. Discuss which method (FIFO or LIFO) would be preferred for income tax purposes in periods of (a) rising prices and (b) declining prices. In period of rising prices LIFO method is preferred and in declining prices FIFO method is preferred.

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