Chapter Five, Problem 2

Inventory valuation methods: computations and concepts. Wave Riders Surfboard Company began business on January 1 of the current year. Purchases of surfboards were as follows:

1/3:	100 boards @ $125
3/17:	50 boards @ $130
5/9:	5/9: 246 boards @ $140
7/3:	400 boards @ $150
10/23:	74 boards @ $150

Wave Riders sold 720 boards at an average price of $250 per board. The company uses a periodic inventory system. 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. approximate the physical flow of a sand and gravel dealer?

3. report low earnings (for tax purposes) for a separate electronics company that has been experiencing declining purchase prices?

ACC205 Week Three File Home Insert Page Layout Formulas Data Review view 2 Tell me what you want to do C32 YOUR ANSWERS BASED UPON Questions 35 COURSE START DATE 36 FIFO 37 Sales 38 Purchases 39 Ending inventory 40 Cost of Goods Sold 41 Gross Profit 42 43 LIFO 44 Sales 45 Purchases 46 Ending inventory 47 Cost of Goods Sold 48 Gross Profit 49 50 Average Cost Sales 52 Purchases 53 Ending inventory 54 Cost of Goods Sold Gross profit 55