Wild Riders Surfboard Company began business on January 1 of the current year. Purchases of surfboards were as follows:
|
Date
|
Quantity
|
Unit Cost
|
Total Cost
|
|
1/3
|
100
|
$125
|
$12,500
|
|
4/3
|
200
|
$135
|
$27,000
|
|
6/3
|
100
|
$145
|
$14,500
|
|
7/3
|
100
|
$155
|
$15,500
|
|
Total
|
500
|
|
$69,500
|
Wild Riders sold 400 boards at $250 per board on the dates listed below. The company uses a perpetual inventory system.
|
Date
|
Quantity Sold
|
Unit Price
|
Total Sales
|
|
3/17
|
50
|
$250
|
$12,500
|
|
5/17
|
75
|
$250
|
$18,750
|
|
8/10
|
275
|
$250
|
$68,750
|
|
Total
|
400
|
|
$100,000
|
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) Show the lowest net income for tax purposes?