Textbook Problem

( Appendix 6B) Inventory Costing Methods

Jet Black Products uses a periodic inventory system. For 2018 and 2019, Jet Black has the following data:

All purchases and sales are for cash.

Required:

1. Compute cost of goods sold, the cost of ending inventory, and gross margin for each year using FIFO.

2. Compute cost of goods sold, the cost of ending inventory, and gross margin for each year using LIFO.

3. Compute cost of goods sold, the cost of ending inventory, and gross margin for each year using the average cost method. ( Note: Use four decimal places for per unit calculations and round all other numbers to the nearest dollar.)

4. CONCEPTUAL CONNECTION Which method would result in the lowest amount paid for taxes?

5. CONCEPTUAL CONNECTION Which method produces the most realistic amount for income? For inventory? Explain your answer.

6. CONCEPTUAL CONNECTION What is the effect of purchases made later in the year on the gross margin when LIFO is employed? When FIFO is employed? Be sure to explain why any differences occur.

7. CONCEPTUAL CONNECTION If you worked Problem 6-68A, compare your answers. What are the differences? Be sure to explain why any differences occurred.