1. Shepherd Cycles used the FIFO inventory method in 2010. Shepherd Cycles plans to continue using the FIFO method in future years.

Requirements: R1. Which inventory principle is most relevant to Shepherd's decision? R2. Shepherd Cycles does not expect prices to change dramatically and wants to use a method that averages price changes.

2. Shepherd Cycles does not expect prices to change dramatically and wants to use a method that averages price changes.

Requirements: R1. Which inventory method would best meet Shepherd's goal?R2. What if Shepherd wanted to expense out the newer purchases of goods instead? Which inventory would best meet that need?

3. Innovation Cycles uses the FIFO inventory method. Innovation started March with 10 bicycles that cost $60 each. On March 16, Innovation bought 20 bicycles at $70 each. On March 31, Innovation sold 25 bicycles.

Requirements: R1. Prepare Innovation's perpetual inventory record.

4. Review the facts on Innovation Cycles in problem #3.

Requirements: R1. Prepare perpetual inventory record for the LIFO method.

5. Review the facts on Innovation Cycles in problem #3.

Requirement: R1. Prepare perpetual inventory record for the average-cost method. Round average cost per unit to the nearest cent and all other amounts to the nearest dollar. 6. Use the Innovation Cycles data in problem #3 to journalize.

Requirement: R1. The March 16 purchase of inventory on account. R2. The March 31 sale of inventory on account. Innovation sold each bicycle for $120. R3. Cost of goods sold under FIFO on March 31.

7. Use the Innovation Cycles data in problem #4 to journalize.

R1. The March 16 purchase of inventory on account. R2. The March 31 sale of inventory on account. Innovation sold each bicycle for $120. R3. The Cost of goods sold under LIFO on March 31.

8. Use the Innovation Cycles data in problem #5 to journalize.

Requirement: R1. The March 16 purchase of inventory on account. R2. The March 31 sale of inventory on account. Innovation sold each bicycle for $120. R3. The Cost of goods sold under average cost on March 31.

9. Refer to problems #3 through #8. After completing those exercises, answer the following questions:

Requirement R1. Which method of inventory accounting produced the lowest cost of goods sold? R2. Which method of inventory accounting produced the highest cost of goods sold? R3. If prices had been declining instead of rising, which inventory method would have produced the highest cost of goods sold?