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Prepare an income statement up to gross profit for december

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Reference no: EM132090510

Problem - The following information relates to the inventory of Harry's Hardware during the month of December:

 

Units

Unit cost

Total cost

Dec. 1 Beginning inventory

500

$5.00

$2,500

10 Purchases

500

5.30

2,650

23 Purchases

600

5.60

3,360

 

1600

 

$8,150

Harry's Hardware uses the periodic inventory system. During the month, 700 units were sold for $6300. A physical stock take on 31 December verified that 590 units were on hand. Ignore GST.

REQUIRED:

A. Prepare an income statement up to gross profit for December using each of the following costing methods:

  • Specific identification, assuming that 300 units were sold from the beginning inventory and 400 units were sold from the first purchase
  • FIFO
  • LIFO
  • Weighted average

B. Which cost flow method resulted in the highest gross profit on sales? The highest ending inventory? Explain why your results differ?

Reference no: EM132090510

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