Problem:
Zingle's buys and then resells a single product as its primary business activity. Following is information concerning the Zingle's inventory activity for the product during August 2004:
August 1: 210 units on hand @5.10 per unit
August 5: Sold 80 units
August 7: Purchased 160 units @5.25 per unit
August 11: Purchased 110 units @ 5.30 per unit
August 15: Sold 200 units
August 21: Purchased 55 units @ 5.70 per unit
August 25: Purchased 290 units @ 5.80 per unit
August 29: Sold 350 units
a. Assuming Zingle's employs a perpetual inventory system, calculate cost of goods sold (units and cost) for the month of August using the following:
1. FIFO cost flow assumption
2. LIFO cost flow assumption
3. Average cost method (round all unit cost calculations to the nearest penny)
b. Which of the three methods resulted in the highest inventory amount for Zingle's August 31 balance sheet?
c. How would the differences among the three methods affect Zingle's income statement and balance sheet for the month?