P Forte commences business on 1 January buying and selling pianos. He sells two standard types, upright and grand, and his transactions for the year are given in the table below.

You observe that the cost to P Forte of the pianos is changed on 1 April, 1 July and 1 October and will not change again until 1 January following.
Required:
(a) Prepare a statement showing gross profit and closing inventory valuation separately for each type of piano, under each of the following assumptions:
(i) FIFO
(ii) LIFO
(iii) Weighted average
(iv) RC.
(b) At a time of rising prices (i.e. using the grand pianos as an example), comment on the usefulness of each of the methods.

Transcribed Image Text:

Upright Grand Buy 4 at 400 1 at 350 2 at 300 1 at 250 Buy 2 at 600 1 at 700 1 at 800 1 at 900 Sell Sell 1 January 31 March 30 April 30 June 31 July 30 September 30 November 1 at 600 1 at 600 3 at 500 1 at 1 000 2 at 1 100