Army-Navy Surplus began March with 70 tents that cost $20 each. During the month, Army-
Navy made the following purchases at cost:
100 tents @ $22
160 tents @ 24
40 tents @ 25
Army-Navy Surplus sold 320 tents, and at March 31 the ending inventory consists of 50 tents. The sale price of each tent was $45.
1. Determine the cost of goods sold and ending inventory amounts for March under (1) average cost, (2) FIFO cost, and (3) LIFO cost. Round average cost per unit to 4 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 Army-Navy Surplus’s income statement for March. Report gross profit. Operating expenses totaled $4,000. Army-Navy uses average costing for inventory. The income tax rate is 40%.