Chapter 6, Problem 6.63AP

  LO 2

(Learning Objective 2: Compare various inventory costing methods) The records of Atlanta Aviation include the following accounts for inventory of aviation parts at July 31 of the current year:

Inventory
Aug 1 Balance 800 units @ $5.00 $4,000
Nov 5 Purchase 500 units @ $6.80 3,400
Jan 24 Purchase 8,000 units @ $7.00 56,000
Apr 8 Purchase 700 units @ $8.00 5,600
Sales Revenue
	Jul 31 9,090 units $128,169

Requirements

  1.    Prepare a partial income statement through gross profit under the average-cost. FIFO. and LIFO methods. Round average cost per unit to two decimal places and all other amounts to the nearest dollar.

  2.    Which inventory method would you use to minimize income tax? Explain why this method causes income tax to be the lowest.