Question

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 purchased eight of these cycles at the following costs:

.:.
On July 28, Speed World 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.
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 avail-able 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.



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  • CreatedApril 17, 2014
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