P6-2B Carrington Distribution markets CDs of the performing artist Christina Spears. At the beginning of October, Carrington had in beginning inventory 1,000 Spears CDs with a unit cost of $5. During October Carrington made the following purchases of Spears CDs.
Oct. 3 3,500 @ $6 Oct. 19 2,000 @ $8
Oct. 9 4,000 @ $7 Oct. 25 2,000 @ $9
During October 9,500 units were sold. Carrington uses a periodic inventory system.
Instructions
(a) Determine the cost of goods available for sale.
(b) Determine (1) the ending inventory and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost). Prove the accuracy of the cost of goods sold under the FIFO and LIFO methods.
(c) Which cost flow method results in (1) the highest inventory amount for the balance sheet and
(2) the highest cost of goods sold for the income statement?
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