1. Jim's Hat Shop received a shipment of hats for which it paid the wholesaler $2,970. The price of the hats was $3,000 but Jim's was given a $30 cash discount and required to pay freight charges of $50. In addition, Jim's paid $130 to cover the travel expenses of an employee who negotiated the purchase of the hats. What amount will Jim's record for inventory? Why?
2. In a period of rising prices, the inventory reported in Plato Company's balance sheet is close to the current cost of the inventory. Cecil Company's inventory is considerably below its current cost. Identify the inventory cost flow method being used by each company. Which company has probably been reporting the higher gross profit?