Accounting: What the Numbers Mean 11th Edition by Wayne McManus,Daniel Viele,David Marshall

Exercise 18

Cost flow assumptions-FIFO and LIFO using a periodic system Mower- Blower Sales Co. started business on January 20, 2016. Products sold were snow blowers and lawn mowers. Each product sold for $1,400. Purchases during 2016 were as follows:

The December 31, 2016, inventory included 10 blowers and 25 mowers. Assume the company uses a periodic inventory system.
Required:
a. What will be the difference between ending inventory valuation at December 31, 2016, under the FIFO and LIFO cost flow assumptions? (Hint: Compute ending inventory under each method, and then compare results.)b. If the cost of mowers had increased to $960 each by December 1, and if management had purchased 30 mowers at that time, which cost flow assumption was probably being used by the firm? Explain your answer.