Stillwater Inc.: Inventory Costing methods - A Perpetual System

The following information is available concerning Stillwater Inc.:

Units Unit Cost
Beginning inventory 200 $10
Purchases:
March 5 300 11
June 12 400 12
August 23 250 13
October 2 150 15

Stillwater, which uses a perpetual system, sold 1,000 units for $22 each during the year. Sales occurred on the following dates:

February 12 150
April 30 200
July 7 200
September 6 300
December 3 150

Required
1. Calculate ending inventory and cost of goods sold for each of the following three methods
a. Moving average
b. FIFO c. LIFO
2. For each of the three methods, compare the results with those of Carter in Exercise 5-22. Which method gives a different answer depending on whether a company uses a periodic or perpetual inventory system?
3. Assume the use of the perpetual system and an estimated tax rate of 30%. How much more or less (indicate which) will Stillwater pay in taxes by using LIFO instead of FIFO? Explain your answer

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Solution Preview

...12 COGS = 150*10=1,500
April 30 COGS = 50*10 + 150* 11=2,150
July 7 COGS = 150*11 + 50*12 = 2,250
September 6 COGS = 300*12 = 3,600
December 3 COGS = 50*12 + 100*13 = 1,900
Total COGS = 11,400

Ending inventory = 150*15 + 150*13 = 4,200

c. LIFO
February 12 COGS = 150*10 = 1,500
April 30 COGS = 200*11 = 2,200
July 7 COGS = 200*12 = 2,400
September 6 COGS = 250*13 + 50*12=3,850
December 3 COGS = 150*15 = 2,250
Total COGS = 12,200

Ending inventory = 50*10 + ...