Question

Mojo Industries tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the accounting period, January 31. The inventory’s selling price is $8 per unit.

Transactions Unit Cost Units Total Cost   Inventory, January 1 $ 2.00 200 $ 400   Sale, January 10 (170 )   Purchase, January 12 2.50 250 625   Sale, January 17 (120 )   Purchase, January 26 3.50 50 175 1. Compute the amount of goods available for sale, ending inventory, and cost of goods sold at January 31 under each of the following inventory costing methods: (Round your intermediate calculations to 2 decimal places and final answers to the nearest dollar amount.) Amount of Goods Available for Sale Ending Inventory Cost of Goods Sold a. Weighted average cost b. First-in, first-out c. Last-in, first-out d. Specific identification 2-a. Of the four methods, which will result in the highest gross profit?    a. Weighted average cost b. First-in, first-out c. Last-in, first-out d. Specific identification 2-b. Of the four methods, which will result in the lowest income taxes?    a. Weighted average cost b. First-in, first-out c. Last-in, first-out d. Specific identification

Answer 1

1. FIFO is having highest GP.

2.Weighted average method will have lowest tax.