Preparing the schedule of inventory

Response to the following problem:

Southern Cross Company Limited made the following purchases during the year:

 Jan. 7 8,000 units @ \$12.00 = \$ 96,000 Mar. 30 9,000 units @ \$12.40 = \$111,600 May 10 12,000 units @ \$12.00 = \$144,000 Jul. 4 16,000 units @ \$12.60 = \$201,600 Sept. 2 6,000 units @ \$12.80 = \$76,800 Dec. 14 7,000 units @ \$12.70 = \$ 88,900

Opening inventory at January 1 amounted to 4,000 units at \$11.90 per unit. Closing inventory at December 31 amounted to 15,000 units . For specific identification purposes, this consisted of 4,000 units of opening inventory, 8,000 units of the January 7 purchase, and 3,000 units of the March 30 purchase. Selling price during the year was stable at \$16 per unit.

Required:

1. Prepare a schedule of inventory as at December 31 based on FIFO, specific identification, and weighted average inventory cost flow assumptions. Assume a periodic inventory system is used.

2. Prepare an income statement showing sales, cost of goods sold, and gross profit based on each of these three assumptions.

3. Which method of inventory valuation matches revenues more closely with costs in this company under current conditions? Why?