Shanghai Company sells electronic equipment that it acquiresfrom the US. During the year 2014, the inventory records reflectedthe following:
| Units | Unit cost |
Beg. Inventory | 40 | $60 |
Purchase 1 | 50 | $70 |
Purchase 2 | 35 | $75 |
At the end of 2014, 45 units are still on hand at the end ofyear 2014. Shanghai sell its electronic equipment at a fixed priceof $100 each. Required:
- Determine the cost of goods sold and the cost of endinginventory assuming the company uses FIFO.
- Determine the amount of gross profit that would be reported forthe year.
- Given the price trend shown above, which valuation method(FIFO, LIFO, or Weighted Average) will result in the lowest grossprofit?
- Given the price trend shown above, which valuation method(FIFO, LIFO, or Weighted Average) will result in a better matchingof Revenues & Cost of goods sold? Explain.
