Flying Tomato sells a snowboard WhiteOut that is popular with snowboard enthusiasts. Presented below is information relating to Flying Tomato’s pu rchases of WhiteOut snowboards during September. During the same month 121 WhiteOut snowboards were sold at $170 each. Flying Tomato uses a periodic inventory system. Date Explanation Units Unit Cost Total Cost Sept. 1 Inventory 25 $ 100 $ 2 500 Sept. 12 Purchases 45 106 4 770 Sept. 19 Purchases 24 110 2 640 Sept. 26 Purchases 50 112 5 600 Totals 144 $ 15 510 Instructions: (a) Compute the ending inventory at September 30 an d cost of goods sold using the FIFO and LIFO methods. Prove the amount allocated to cost of good s sold under each method. (b) For both FIFO and LIFO calculate the sum of en ding inventory and cost of goods sold. What do you notice about the answers you found for each method? (c) What is gross profit under each method? (d) Which method results in a larger amount reporte d for assets on the balance sheet? Which results in a larger amount reported for owner’s equity on the balance sheet?2) Part 2 is to answer in paragraph form the following question:FIFO and LIFO are the two most common cost flow assumptions made in costing inventories. The amounts assigned to the same inventory items on hand may be different under each cost flow assumption. If a company has no beginning inventory explain the difference in ending inventory values under the FIFO and LIFO cost bases when the price of inventory items purchased during the period have been (1) increasing (2) decreasing and (3) remained constant.
