Question

1. Cornerstone Exercise 6-25
   Effects of Inventory Costing Methods

   Filimonov Inc. has the following information related to purchases and sales of one of its inventory items:

   Date	Description	Units Purchased at Cost	Units Sold at Retail
   June 1	Beginning Inventory	200 units @ $10 = $2,000
   9	Purchase 1	300 units @ $12 = $3,600
   14	Sale 1		400 units @ $25
   22	Purchase 2	250 units @ $14 = $3,500
   29	Sale 2		225 units @ $25

   Required:

   1. In a period of rising prices, which inventory costing method produces the highest amount for ending inventory?
   

   2. In a period of rising prices, which inventory costing method produces the highest net income?
   

   3. In a period of rising prices, which inventory costing method produces the lowest payment for income taxes?
   

   4. In a period of rising prices, which inventory method generally produces the most realistic amount for cost of goods sold?
   

   5. In a period of rising prices, which inventory method generally produces the most realistic amount for inventory?
   

   6. Would your answer to the previous question change if inventory prices were decreasing during the period?

Answer 1

Answer is given below