Alternative Inventory Methods Park Company’s perpetual inventory records indicate the following transactions in the month of June: Units Cost/Unit Inventory, June 1 200 $3.20 Purchases: June 3 200 3.50 June 17 250 3.60 June 24 300 3.65 Sales: June 6 300 June 21 200 June 27 150 Required: 1. Compute the cost of goods sold for June and the inventory at the end of June using each of the following cost flow assumptions: a. FIFO b. LIFO c. Average cost (Round unit costs to 3 decimal places and other amounts to the nearest dollar.) 2. Next Level Why are the cost of goods sold and ending inventory amounts different for each of the three methods? What do these amounts tell us about the purchase price of inventory during the year? 3. Next Level Which method produces the most realistic amount for net income? For inventory? Explain your answer.
E7-12 Alternative Inventory Methods Park Company’s perpetual inventory records indicate the following transactions in the month of June:
Units Cost/Unit
Inventory, June 1 200 $3.20
Purchases:
June 3 200 3.50
June 17 250 3.60
June 24 300 3.65
Sales:
June 6 300
June 21 200
June 27 150
Required:
1. Compute the cost of goods sold for June and the inventory at the end of June using each of the following cost flow assumptions:
a. FIFO
b. LIFO
c. Average cost (Round unit costs to 3 decimal places and other amounts to the nearest dollar.)
2. Next Level Why are the cost of goods sold and ending inventory amounts different for each of the three methods? What do these amounts tell us about the purchase price of inventory during the year?
3. Next Level Which method produces the most realistic amount for net income? For inventory? Explain your answer.
4. Next Level If Park uses IFRS, which of the previous alternatives would be acceptable and why?
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