Gladstone Company tracks the number of units purchased and sold throughout each accounting period but applies its

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Gladstone Company tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31, 2012.

Transactions Units Unit Cost

Beginning inventory, January 1, 2012...... 1,800............................... $50

Transactions during 2012:

a. Purchase, January 30...................... 2,500................................ 62

b. Sale, March 14 ($100 each).............(1,450)

c. Purchase, May 1............................ 1,200............................... 80

d. Sale, August 31 ($100 each)............ (1,900)

Required

1. Compute the amount of goods available for sale, ending inventory, and cost of goods sold at December 31, 2012, under each of the following inventory costing methods:

a. Last-in, first-out.

b. Weighted average cost.

c. First-in, first-out.

d. Specific identification, assuming that the March 14, 2012, sale was selected two-fifths from the beginning inventory and three-fifths from the purchase of January 30, 2012. Assume that the sale of August 31, 2012, was selected from the remainder of the beginning inventory, with the balance from the purchase of May 1, 2012.

2. Of the four methods, which will result in the highest gross profit? Which will result in the lowest income taxes?

Ending Inventory
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula                Ending Inventory Formula =...
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Related Book For  book-img-for-question

Fundamentals of Financial Accounting

ISBN: 978-0078025372

4th edition

Authors: Fred Phillips, Robert Libby, Patricia Libby

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