Glenmount Inc. is trying to determine whether to use the FIFO or average cost method. The accounting records show the following selected inventory information:

The company accountant has prepared the following partial income statement to help management understand the financial statement impact of each cost determination method.

Instructions
(a) Complete the perpetual inventory schedule shown above, assuming the use of the FIFO cost method.
(b) Complete the perpetual inventory schedule shown above, assuming the use of the average cost method. (Use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.)
(c) Fill in the missing information in the blanks shown in the income statements above.
(d) Explain whether the comparative profits of each cost method determined in part (c) will be expected to increase, decrease, or not change if
(1) Costs fall, and
(2) Costs remain stable.

Transcribed Image Text:

Purchases Cost of Goods Sold Balance Date Oct. 2 9,000$12 $108,000 Units Cost Total Units CoUnits C Cost Total 15 15,000 14 210,000 29 22,000 FIFO Average Cost $525,000 Sales Cost of goods sold Gross profit Operating expenses Profit before income tax Income tax expense (30%) Profit $525,000 200,000 200,000