Textbook Problem

Inventory Costing Methods

Crandall Distributors uses a perpetual inventory system and has the following data available for inventory, purchases, and sales for a recent year.

Required:

1. Compute the cost of ending inventory and the cost of goods sold using the specific identification method. Assume the ending inventory is made up of 40 units from beginning inventory, 30 units from Purchase 1, 80 units from Purchase 2, and 40 units from Purchase 3.

2. Compute the cost of ending inventory and cost of goods sold using the FIFO inventory costing method.

3. Compute the cost of ending inventory and cost of goods sold using the LIFO inventory costing method.

4. Compute the cost of ending inventory and cost of goods sold using the average cost inventory costing method. ( Note: Use four decimal places for per-unit calculations and round all other numbers to the nearest dollar.)

5. CONCEPTUAL CONNECTION Compare the ending inventory and cost of goods sold computed under all four methods. What can you conclude about the effects of the inventory costing methods on the balance sheet and the income statement?