Details regarding inventory of appliances at January 1, 2010, purchases invoices during the year, and inventory count at December 31, 2010, of Arctic
Appliances are summarized as follows:
Instructions
1. Find out the cost of the inventory on December 31, 2010, 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. Find out the cost of the inventory on December 31, 2010, by the last-in, first out method, following procedures indicated in (1).
3. Find out the cost of the inventory on December 31, 2010, by the average cost method, using 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) decliningprices.