The following data pertain to Model Q two-wheeled trailers in the inventory of Travel Trailers Equipment Company during the year 2016:

Inventory, January 1....................25 units at $2,620

Purchases:

February 27..............................19 units at $2,330

August 16................................23 units at $2,325

November 19............................17 units at $2,435

Inventory, December 31...........................18 units

INSTRUCTIONS

1. Determine the cost of the inventory on December 31 and the cost of goods sold for the year ending on that date under each of the following valuation methods:

(a) FIFO,

(b) LIFO, and

(c) Average cost.

When using the average cost method, compute the unit cost to the nearest cent.

2. Assume that the replacement cost of each unit on December 31 is $2,425. Using the lower of cost or market rule, find the inventory amount under each of the methods given in instruction 1.

Analyze:

Using the lower of cost or market rule, which inventory amount will result in the highest net income for the period?