The following data relates to Fay Ltd, a company that buys and sells only one product:

1. Calculate the cost of ending inventory and the COGS, assuming:

a. A perpetual system using the LIFO cost flow assumption

b. A periodic system using the weighted average method.
2. Assume that, at the end of the month, you discover that the net realisable value of each item is $6.50. Calculate and prepare the journal entry to adjust inventory records, if required, assuming:

a. perpetual system using the LIFO cost flow assumption

b. periodic system using the weighted average method.
3. Without reperforming any calculations, briefly explain the potential effects on the company's financial statements if a FIFO rather than a LIFO inventory cost flow assumption was adopted.

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Date May 1 2 11 22 22 30 Transaction 1000 units on hand at $6 per unit Purchased 1200 units for $7 per unit 800 units were sold for $7.50 per unit 900 units were purchased for $7.50 per unit 1100 units were sold for $8.00 per unit.