[twee16]

During January 2014, Alafua PC, a retailer of personal computers, began operations. The transactions for January were as shown below (ignore GST).

January
5 Purchased eight computers for $1300 each.
8 Sold three computers for $2500 each.
10 Purchased three computers for $1400 each.
13 Sold one computer for $2500.
16 Sold two computers for $2500 each.
22 Purchased four computers for $1500 each.
25 Sold two computers for $2600 each.

Other expenses for the month were $1200.

Required:
a. Record the information on a perpetual inventory record using each of the following methods:
1. FIFO
2. moving average
3. LIFO.
b. Prepare an income statement based on each of the three methods of inventory cost flows.
c. Give reasons to the manager of Alafua PC for the variations in cost of sales and profit in the three statements.
d. What factors should be considered in choosing an inventory cost flow method? Make a recommendation to management on the appropriate cost flow method to use in this business.

[paraclete]

During January 2014, Alafua PC, a retailer of personal computers, began operations. The transactions for January were as shown below (ignore GST).

January
5 Purchased eight computers for $1300 each.
8 Sold three computers for $2500 each.
10 Purchased three computers for $1400 each.
13 Sold one computer for $2500.
16 Sold two computers for $2500 each.
22 Purchased four computers for $1500 each.
25 Sold two computers for $2600 each.

Other expenses for the month were $1200.

Required:
a. Record the information on a perpetual inventory record using each of the following methods:
1. FIFO
2. moving average
3. LIFO.
b. Prepare an income statement based on each of the three methods of inventory cost flows.
c. Give reasons to the manager of Alafua PC for the variations in cost of sales and profit in the three statements.
d. What factors should be considered in choosing an inventory cost flow method? Make a recommendation to management on the appropriate cost flow method to use in this business.

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