Concept explainers
Identify the cost assigned to ending inventory and cost of goods sold using the following methods. And tell which method yields the highest net income.
- (a) Specific identification
- (b) Weighted average
- (c) FIFO
- (d) LIFO
Explanation of Solution
(a)
Calculate cost assigned to ending inventory using specific identification method.
Calculate cost assigned to cost of goods sold using specific identification method.
(b)
Calculate cost assigned to ending inventory using weighted average method.
Calculate cost assigned to cost of goods sold using weighted average method.
Working note:
Calculate weighted average cost per unit.
(c)
Calculate cost assigned to ending inventory using FIFO method.
Calculate cost assigned to cost of goods sold using FIFO method.
(d)
Calculate cost assigned to ending inventory using LIFO method.
Calculate cost assigned to cost of goods sold using LIFO method.
FIFO method yields the highest net income, because this method only having less cost of goods sold comparing with other inventory method.
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