City University Of New York Operations And Supply Chain Management Assignment Help - Accounting question

Question - Listed below are eight technical accounting terms introduced in this chapter.

Retail method FIFO method Lower-of-cost-or-market
Gross profit method LIFO method Specific identification
Flow assumption Average-cost method

Each of the following statements may (or may not) describe one of these technical terms. For each
statement, indicate the term described, or answer "None" if the statement does not correctly describe
any of the terms.

a. A pattern of transferring unit costs from the Inventory account to the Cost of Goods Sold that
may (or may not) parallel the physical flow of merchandise.
b. The only flow assumption in which all units of merchandise are assigned the same per-unit cost.
c. The method used to record the cos ...Read More t of goods sold when each unit in the inventory is unique.
d. The most conservative of the flow assumptions during a period of sustained inflation.
e. The flow assumption that provides the most current valuation of inventory in the balance sheet.
f. A technique for estimating the cost of goods sold and the ending inventory that is based on the
relationship between cost and sales price during the current accounting period.



Speed World Cycles sells high-performance motorcycles and motocross racers. One of Speed
World's most popular models is the Kazomma 900 dirt bike. During the current year, Speed W orld
purchased eight of these cycles at the following costs:
Purchase Date Units Purchased Unit Cost Total Cost
July 1 2 $ 4,950 $ 9,900
July 22 3 5,000 15,000
Aug. 3 3 5,100 15,300

8 $ 40,200

On July 28, Speed W orld sold four Kazomma 900 dirt bikes to the Vince Wilson racing team. The
remaining four bikes remained in inventory at September 30, the end of Speed World's fiscal year.
Assume that Speed W orld uses a perpetual inventory system.
a(1) Compute the cost of goods sold relating to the sale on July 28 and the ending inventory of
Kazomma 900 dirt bikes at September 30, using average cost method.
Cost of goods sold $
Ending inventory $

a(2) Compute the cost of goods sold relating to the sale on July 28 and the ending inventory of
Kazomma 900 dirt bikes at September 30, using FIFO method.
Cost of goods sold $
Ending inventory $

a(3) Compute the cost of goods sold relating to the sale on July 28 and the ending inventory of
Kazomma 900 dirt bikes at September 30, using LIFO method.
Cost of goods sold $
Ending inventory $

b(1) Which of the three cost flow assumptions will result in Speed World Cycles reporting the highest
net income for the current year?
Average cost
LIFO
FIFO

b(2) Which of the three cost flow assumptions will minimize the income taxes owed by Speed World
Cycles for the year?
LIFO
Average cost
FIFO

b(3) May Speed W orld Cycles use the cost flow assumption that results in the highest net income for

the current year in its financial statements, but use the cost flow assumption that minimizes
taxable income for the current year in its income tax return?
No
Yes ...Read Less

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