Question: Military Surplus began May 2016 with 80
Military Surplus began May 2016 with 80 stoves that cost $20 each. During the month, Military Surplus made the following purchases at cost:
Military Surplus sold 286 stoves, and at May 31, the ending inventory consists of 64 stoves. The sale price of each stove was $45.
Requirements
1. Determine the cost of goods sold and ending inventory amounts for May under the average cost, FIFO cost, and LIFO cost. Round the average cost per unit to two decimal places, and round all other amounts to the nearest dollar.
2. Explain why cost of goods sold is highest under LIFO. Be specific.
3. Prepare Military Surplus’s income statement for May. Report gross profit. Operating expenses totaled $3,500. Military Surplus uses average costing for inventory. The income tax rate is 30%.
Transcribed Image Text:
May 6 100 stoves @ $25 = $2,500 120 stoves @ $30 = 18 3,600 26 50 stoves @ $35 = 1,750
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