Jepson Electronic Center began July with 90 units of merchandise inventory that cost $70 each. During July, the store made the following purchases:
- July 3: 20 units @ $75 each
- July 12: 40 units @ $78 each
- July 18: 60 units @ $84 each
Jepson uses the periodic inventory system, and the physical count at July 31 indicates that 98 units of inventory are on hand.
1. Determine the ending merchandise inventory and cost of goods sold amounts for the July financial statements using FIFO, LIFO, and weighted average inventory costing methods.
2. Sales revenue for July totaled $27000. Compute Jepson's gross profit for July using each method.
3. Which method will result in the lowest income taxes for Jepson? Why? Which method will result in the highest income taxes for Jepson? Why?