Courtney Company uses a periodic inventory system Data for 2014
Courtney Company uses a periodic inventory system. Data for 2014 are as follows: beginning merchandise inventory ( December 31, 2013), 3,000 units at $ 35; purchases, 12,000 units at $ 38; operating expenses ( excluding income taxes), $ 213,000; ending inventory per physical count at December 31, 2014, 2,700 units; sales price per unit, $ 70; and average income tax rate, 30 percent.
1. Prepare statements of earnings under the FIFO and weighted- average costing methods. Use a format similar to the following:
2. Which method, FIFO or weighted- average cost, is preferable in terms of (a) net earnings and (b) cash flow? Explain.
3. What would be your answer to (2), assuming that prices were falling? Explain.
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