Question

Inventory Costing Methods-Periodic Method Chen Sales Corporation uses the periodic inventory system. On January 1, 2012, Chen had: 1,000 units of product A with a unit cost of $30 per unit. A summary of purchases and sales during 2012 follows:

	Unit Cost	Units Purchased	Units Sold
Feb.2			400
Apr.6	$32	1,800
July 10			1,600
Aug.9	36	800
Oct.23			800
Dec.30	39	1,200

Required

1. Assume that Chen uses the first-in, first-out method. Compute the cost of goods sold for 2012 and the ending inventory balance at December 31, 2012, for product A.
2. Assume that Chen uses the last-in, first-out method. Compute the cost of goods sold for 2012 and the ending inventory balance at December 31, 2012, for product A.
3. Assume that Chen uses the weighted-average cost method. Compute the cost of goods sold for 2012 and the ending inventory balance at December 31, 2012, for product A.

Do not round until your final answers. Round your answers to the nearest dollar.

a.	First-in, First-out:
	Ending Inventory
	Cost of Goods Sold
b.	Last-in, first-out:
	Ending Inventory
	Cost of Goods Sold
c.	Weighted Average
	Ending Inventory
	Cost of goods sold

d. Assuming that Chen’s products are perishable items, which of the three inventory costing methods would you choose to:
Assume this is during a period of rising costs.

1. Reflect the likely goods flow through the business?	AnswerFirst-in, first outLast-in, first outWeighted-average cost
2. Minimize income taxes for the period?	AnswerFirst-in, first outLast-in, first outWeighted-average cost
3. Report the largest amount of net income for the period?	AnswerFirst-in, first outLast-in, first outWeighted-average cost

Please answer all parts of the question.

Answer 1

a. FIFO

FIFO	Cost of Goods Available for sale			Cost of Goods Sold			Inventory on hand
Activity	Units	Unit Price	Amount	Units	Unit Price	Amount	Units	Unit Price	Amount
Beginning Inventory	1000	$           30.00	$         30,000	1000	$           30.00	$         30,000
Apr 6 Purchase	1800	$           32.00	$         57,600	1800	$           32.00	$         57,600
Aug 9 Purchase	800	$           36.00	$         28,800				800	$           36.00	$         28,800
Dec 30 Purchase	1200	$           39.00	$         46,800				1200	$           39.00	$         46,800
Total	4800		$      163,200	2800		$         87,600	2000		$         75,600

b. LIFO

LIFO	Cost of Goods Available for sale			Cost of Goods Sold			Inventory on hand
Activity	Units	Unit Price	Amount	Units	Unit Price	Amount	Units	Unit Price	Amount
Beginning Inventory	1000	$           30.00	$         30,000				1000	$           30.00	$         30,000
Apr 6 Purchase	1800	$           32.00	$         57,600	800	$           32.00	$         25,600	1000	$           32.00	$         32,000
Aug 9 Purchase	800	$           36.00	$         28,800	800	$           36.00	$         28,800
Dec 30 Purchase	1200	$           39.00	$         46,800	1200	$           39.00	$         46,800
Total	4800		$      163,200	2800		$      101,200	2000		$         62,000

c. Weighted Average

Weighted Average	Cost of Goods Available for sale			Cost of Goods Sold			Inventory on hand
Activity	Units	Unit Price	Amount	Units	Unit Price	Amount	Units	Unit Price	Amount
Beginning Inventory	1000	$           30.00	$         30,000
Apr 6 Purchase	1800	$           32.00	$         57,600
Aug 9 Purchase	800	$           36.00	$         28,800
Dec 30 Purchase	1200	$           39.00	$         46,800
Total	4800	$           34.00	$      163,200	2800	$           34.00	$         95,200	2000	$           34.00	$         68,000

d.
1. FIFO
2. LIFO
3. FIFO