Details regarding the inventory of appliances at January 1, 2012, purchases invoices during the year and the inventory count at December 31, 2012, of Icelander Appliances are summarized as follows:
|
Model
|
Inventory 1 Jan
|
1st
|
2nd
|
3rd
|
Inventory 31 Dec
|
|
101Sx
|
9 at $213
|
7 at $215
|
6 at $222
|
6 at $225
|
9
|
|
256Br
|
20 at $120
|
12 at $130
|
4 at $130
|
4 at $140
|
8
|
|
378Wh
|
6 at $305
|
3 at $310
|
3 at $316
|
4 at $317
|
4
|
|
590Pm
|
2 at $520
|
2 at $527
|
2 at $530
|
2 at $535
|
4
|
|
661Qu
|
6 at $520
|
8 at $531
|
4 at $549
|
6 at $542
|
7
|
|
828Ts
|
-
|
4 at $222
|
4 at $232
|
-
|
2
|
|
913Vn
|
8 at $35
|
12 at $36
|
16 at $37
|
14 at $39
|
12
|
Instructions
1. Determine the cost of the inventory on December 31, 2012, by the first-in, first-out method. Present data in columnar form, using the following headings:
Model
Quantity
Unit Cost
Total Cost
If the inventory of a particular model comprises one entire purchase plus a portion of another purchase acquired at a different unit cost, use a separate line for each purchase.
2. Determine the cost of the inventory on December 31, 2012, by the last-in, first-out method, following the procedures indicated in (1).
3.Determine the cost of the inventory on December 31, 2012, by the average cost method, using the columnar headings indicated in (1).
4.Discuss which method (FIFO or LIFO) would be preferred for income tax purposes in periods of (a) rising prices and (b) declining prices.