Assume that Speed World uses a periodic inventory system. (See the data given before Problem 8.2A.)
Instructions
a. Compute the cost of goods sold relating to the sale on July 28 and the ending inventory of Kazomma 900 dirt bikes at September 30, using the following cost flow assumptions:
1. Average cost.
2. FIFO.
3. LIFO.
Show the number of units and unit costs in each cost layer of the ending inventory. You may determine the cost of goods sold by deducting ending inventory from the cost of goods available for sale.
b. If Speed World Cycles uses the LIFO cost flow assumption for financial reporting purposes, can it use the FIFO method for income tax purposes? Explain.
Speed World Cycles sells high-performance motorcycles and motocross racers. One of Speed World's most popular models is the Kazomma 900 dirt bike. During the current year, Speed World Cycles purchased eight of these bikes at the following costs:

On July 28, Speed World Cycles sold four Kazomma 900 dirt bikes to the Vince Wilson racing team. The remaining four bikes remained in inventory at September 30, the end of Speed World's fiscal year.

Transcribed Image Text:

Total Unit Purchased Cost Units Purchase Date $4,950 9,900 15,000 5,10015,300 A0) July 1 hdy-.-.- July 22 .. . Aug. 3 5,000