Gladstone Company tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31. Transactions Units Unit Cost Beginning inventory, January 1 1,700 $ 65 Transactions during the year: a. Purchase, January 30 2,750 76 b. Sale, March 14 ($100 each) (1,350) c. Purchase, May 1 1,450 95 d. Sale, August 31 ($100 each) (1,800) Assuming that for Specific identification method (item 1d) the March 14 sale was selected two-fifths from the beginning inventory and three-fifths from the purchase of January 30. Required: Compute the amount of goods available for sale, ending inventory, and cost of goods sold at December 31 under each of the following inventory costing methods: a. Last-in, first-out. b. Weighted average cost. c. First-in, first-out. d. Specific identification, assuming that the March 14 sale was selected two-fifths from the beginning inventory and three-fifths from the purchase of January 30. Assume that the sale of August 31 was selected from the remainder of the beginning inventory, with the balance from the purchase of May 1. 2-a. Of the four methods, which will result in the highest gross profit? 2-b. Of the four methods, which will result in the lowest income taxes?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

Gladstone Company tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31.

Transactions	Units	Unit Cost
Beginning inventory, January 1	1,700	$ 65
Transactions during the year:
a. Purchase, January 30	2,750	76
b. Sale, March 14 ($100 each)	(1,350)
c. Purchase, May 1	1,450	95
d. Sale, August 31 ($100 each)	(1,800)

Assuming that for Specific identification method (item 1d) the March 14 sale was selected two-fifths from the beginning inventory and three-fifths from the purchase of January 30.

Required:

Compute the amount of goods available for sale, ending inventory, and cost of goods sold at December 31 under each of the following inventory costing methods:
a. Last-in, first-out.
b. Weighted average cost.
c. First-in, first-out.
d. Specific identification, assuming that the March 14 sale was selected two-fifths from the beginning inventory and three-fifths from the purchase of January 30. Assume that the sale of August 31 was selected from the remainder of the beginning inventory, with the balance from the purchase of May 1.
2-a. Of the four methods, which will result in the highest gross profit?