Wild Riders Surfboard Company began business on January 1 of the current year. Purchases of surfboards were as follows:
4. Inventory valuation methods: computations and concepts. Wild Riders Surfboard Company began
business on January 1 of the current year. Purchases of surfboards were as follows:
| Date | Quantity | Unit Cost | Total Cost |
| 1/3 | 100 | $125 | $12,500 |
| 4/3 | 200 | $135 | $27,000 |
| 6/3 | 100 | $145 | $14,500 |
| 7/3 | 100 | $155 | $15,500 |
| Total | 500 | $69,500 |
Wild Riders sold 400 boards at $250 per board on the dates listed below. The company uses a perpetual inventory system.
| Date | Quantity Sold | Unit Price | Total Sales |
| 3/17 | 50 | $250 | $12,500 |
| 5/17 | 75 | $250 | $18,750 |
| 8/10 | 275 | $250 | $68,750 |
| Total | 400 | $100,000 |
Instructions
- Calculate cost of goods sold, ending inventory, and gross profit under each of the following inventory valuation methods:
- First-in, first-out
- Last-in, first-out
- Weighted average
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b. Which of the three methods would be chosen if management’s goal is to
(1) produce an up-to-date inventory valuation on the balance sheet?
(2) show the lowest net income for tax purposes?
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