Scrappers Supplies tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31.
Required:
1. Compute the cost of goods available for sale, cost of ending inventory, and cost of goods sold at December 31 under each of the following inventory costing methods:
a. Last-in, first-out.
b. Weighted average cost.
c. First-in, first-out.
d. Specific identification, assuming that the April 1 sale was selected one-fifth from the beginning inventory and four-fifths from the purchase of March
2. Assume that the sale of August 1 was selected from the purchase of June 30. 2. Of the four methods, which will result in the highest gross profit? Which will result in the lowest income taxes?