Inventory valuation methods: computations and concepts. Wild Riders Surfboard Company began business on January 1 of the current year. Purchases of surfboards were as follows:
Date Quantity Unit Cost Total Cost
1/3 100 $125 $12,500
4/3 200 $135 $27,000
6/3 100 $145 $14,500
7/3 100 $155 $15,500
Total 500 $69,500
Wild Riders sold 400 boards at $250 per board on the dates listed below. The company uses a perpetual inventory system.
Date Quantity Sold Unit Price Total Sales
3/17 50 $250 $12,500
5/17 75 $250 $18,750 8/10 275 $250 $68,750 Total 400 $100,000
Instructions
a. Calculate cost of goods sold, ending inventory, and gross profit under each of the following inventory valuation methods:
• First-in, first-out
• Last-in, first-out
• Weighted average
b. Which of the three methods would be chosen if management's goal is to (1) produce an up-to-date inventory valuation on the balance sheet? (2) show the lowest net income for tax purposes?