Following is an inventory acquisition schedule for Fees Corp. for 2012: Units Unit Cost Beginning inventory.....................4,000...............$20 Purchases:

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Following is an inventory acquisition schedule for Fees Corp. for 2012:

                                                        Units            Unit Cost

Beginning inventory.....................4,000...............$20

Purchases:

February 4.................................2,000................18

April 12....................................3,000................16

September 10..............................1,000................14

December 5................................2,500................12

During the year, Fees sold 11,000 units at $30 each. All expenses except cost of goods sold and taxes amounted to $60,000. The tax rate is 30%.

Required

1. Compute cost of goods sold and ending inventory under each of the following three methods assuming a periodic inventory system: (a) weighted average, (b) FIFO, and (c) LIFO.

2. Prepare income statements under each of the three methods.

3. Which method do you recommend so that Fees pays the least amount of taxes during 2012? Explain your answer.

4. Fees anticipate that unit costs for inventory will increase throughout 2013. Will Fees be able to switch from the method you recommended that it use in 2012 to another method to take advantage of the increase in prices for tax purposes? Explain your answer.

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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