Question - The following information is taken from the records of West End Distribution Inc. for the month ended May 31.
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|
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Units
|
Unit Cost
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|
May 1
|
Purchase #1
|
100
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$1
|
|
May 6
|
Purchase #2
|
200
|
1
|
|
May 12
|
Purchase #3
|
125
|
2
|
|
May 19
|
Purchase #4
|
350
|
2
|
|
May 29
|
Purchase #5
|
150
|
3
|
At May 31, 200 units remain unsold, for specific identification purposes, items on hand at May 31 were:
100 units of Purchase #1
100 units of Purchase #4
The other units were sold on May 31 for $2 each.
Required -
1. Calculate the cost of ending inventory under each of the following costing methods:
a. FIFO
b. Specific identification
c. Weighted average
2. Compute the following calculations:
- Sales
- Cost of goods sold
- Gross profit
3. One of the company's strategies is to minimize income taxes and its accounting policies will reflect this. Which inventory cost method should they adopt and why?