Dutch Truck Sales sells semitrailers. The current inventory includes the following five semitrailers (identical except for paint color) along with purchase dates and costs:
Semitrailer .................................Purchase Date.................................Cost
1................................................April 3, 2013.............................$73,000
2...............................................April 10, 2013..............................70,000
3...............................................April 10, 2013..............................71,000
4.................................................May 4, 2013..............................77,000
5................................................May 12, 2013.............................78,500
On May 20, 2013, a trucking firm purchased semitrailer 3 from Dutch for $86,000.
1. Compute the gross margin on this sale assuming Dutch uses the:
(a) FIFO inventory method
(b) LIFO inventory method
(c) Specific identification method
2. Which inventory method do you think Dutch should use? Why?