Artic Appliances uses the periodic inventory system. Details regarding the inventory of appliances at January 1, 2010, purchases invoices during the year, and the inventory count at December 31, 2010, are summarized as follows:

Instructions
1. Determine the cost of the inventory on December 31, 2010, by the first-in, first-out method. Present data in columnar form, using the following headings:
Model Quantity Unit Cost Total Cost
If the inventory of a particular model comprises one entire purchase plus a portion of another purchase acquired at a different unit cost, use a separate line for each purchase.
2. Determine the cost of the inventory on December 31, 2010, by the last-in, first-out method, following the procedures indicated in (1).
3. Determine the cost of the inventory on December 31, 2010, by the average cost method, using the columnar headings indicated in (1).
4. Discuss which method (FIFO or LIFO) would be preferred for income tax purposes in periods of
(a) Rising prices and
(b) Decliningprices.

Transcribed Image Text:

Purchases Invoices Inventory, January 1 27 at $213 10 at 6 at 305 2 at 520 6 at 520 Inventory Count, December 31 2nd Model 3rd 1st 18 at $222 65 2 at BB900 18 at $225 30 21 at $215 2 at 65 6 at 3 at 310 70 C911 60 4 at 317 2 at 535 6 at 542 L100 N201 Q73 Z120 ZZRF 3 at 316 2 at 527 8 at 531 2 at 530 4 at 549 4 at 232 16 at 8 at 12 at 14 at 12 78 70 72 74