Problem: Flint-Mart Centre Inc. began operations on May 1 and uses a perpetual inventory system. During May, the company had the following purchases and sales for one of its products:
|
Date
|
Purchases
|
Sales
|
|
Units
|
Unit Cost
|
Units
|
Unit Price
|
|
May-01
|
120
|
$101
|
|
|
|
May-03
|
|
|
80
|
$254
|
|
May-08
|
100
|
110
|
|
|
|
May-13
|
|
|
80
|
278
|
|
May-15
|
60
|
115
|
|
|
|
May-20
|
|
|
60
|
304
|
|
May-27
|
|
|
40
|
328
|
Required:
Question 1: Determine the cost of goods sold and cost of ending inventory using (1) FIFO and (2) average cost.
Question 2: Which cost formula produces the higher gross profit and net income?
Question 3: Which cost formula produces the higher ending inventory valuation?
Question 4: Which cost formula produces the higher cash flow?
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