Chapter 6, Problem 6.72BP

 LO 2

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

Inventory
Aug 1 Balance 800 units @ $7.00 $ 5,600
Nov 5 Purchase 500 units @ $7.10 3,550
Jan 24 Purchase 8,100 units @ $7.50 60,750
Apr 8 Purchase 600 units @ $8.50 5,100

Sales Revenue
	Jul 31 9,030 units $130,935

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 whole dollar.

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