The owner of Fardan Stereo Sales showed the following adjusted trial balance at December 31, 2023:

*Assume normal account balances.

The owner, Mikel Fardan, is analyzing the effect of the various merchandise inventory costing methods on his financial statements and has prepared the following schedule:

Required
1. Calculate the merchandise inventory values at December 31, 2023, under each inventory costing method shown in the schedule above.
2. Prepare a single-step income statement (showing one line each for net sales, cost of goods sold, operating expenses, and interest expense) for the year ended December 31, 2023, along with a balance sheet at December 31, 2023, assuming:
a. FIFO
b. Moving weighted average

Analysis Component:
3. Does the schedule above reflect rising costs for merchandise inventory or falling costs? Explain how you know.
4. Based on your results in Part 2, which method should the owner use if he wants to:
a. Maximize profit?
b. Maximize assets?

Transcribed Image Text:

Cash........... Accounts receivable.. Merchandise inventory... Prepaid rent..... Store fixtures....... Accumulated depreciation, store fixtures... Trademark.... Accounts payable.. Unearned sales revenue. Notes payable, due in 2026.. Mikel Fardan, capital..... Mikel Fardan, withdrawals... Sales............ Sales discounts... Cost of goods sold... Account Delivery expense.. Rent expense.... Salaries expense... Interest expense.. Depreciation expense.. Account Balance* 16,000 27,000 ? 36,000 117,000 82,000 3,000 18,000 4,000 22,000 61,000 44,000 449,000 6,000 ? 5,000 92,000 109,000 2,000 8,000