Chapter 6, Problem 6.20E

Comparing cost of goods sold and gross profit-FIFO, LIFO, and weighted-average methods

Assume that RK Tire Store completed the following perpetual inventory transactions for a line of tires:

May 1	Beginning merchandise inventory	24 tires@$ 61 each
11	Purchase	6 tires @ $ 76 each
23	Sale	16 tires @ $ 89 each
26	Purchase	14 tires@$ 86 each
29	Sale	17 tires@ $ 89 each

Requirements

1. Compute cost of goods sold and gross profit using the FIFO inventory costing method.

2. Compute cost of goods sold and gross profit using the LIFO inventory costing method.

3. Compute cost of goods sold and gross profit using the weighted average inventory costing method. (Round weighted-average cost per unit to the nearest cent and all other amounts to the nearest dollar.)

4. Which method results in the largest gross profit, and why?