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Harris Bearing Company uses the periodic inventory system to account for its inventory. The following...

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Accounting

Harris Bearing Company uses the periodic inventory system to account for its inventory. The following information was available from the companys inventory records for October:

Purchases

10/1 (balance) 2,400 units @$10

10/12 3,000 units @$5

10/25 1,500 units @$9

Sales

10/14 3,800 unites @$16

10/30 1,700 units @21

  1. Assuming that you are a manager of Harris Bearing and is asked to choose one of the inventory flow methods (average, FIFO or LIFO) to account for Harriss inventory. Based on your calculation in 1 and 2, which method will you choose? Please provide a brief explanation.

Calculations for 1:

cost of goods sold and gross profit to be reported on Harriss Income Statement of October:

Average cost FIFO LIFO
Sales 96,500 96,500 96,500
Cost of goods sold 41,855 39,900 38,500
Gross Profit 54,645 56,600 58,000

Calculations for 2:

Harriss cost of ending inventory as of October 31:

Average Cost of Ending Inventory = 1,400 units * $7.6087 per unit = $10,652

FIFO Method: Cost of Ending Inventory = 1400 units * $9 = $12,600 LIFO Method: Cost of Ending Inventory = 1,400 units * $10 = $14,000

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