Question 6.5: Craig Company buys and sells one product. Its beginning inve...

Craig Company buys and sells one product. Its beginning inventory, purchases, and sales during calendaryear 2019 follow.

Additional tracking data for specific identification: (1) January 15 sale—200 units @ $14, (2) April 1 sale—200 units @ $15, and (3) November 1 sale—200 units @ $14 and 100 units @ $20.

Required
1. Compute the cost of goods available for sale.
2. Apply the four methods of inventory costing (FIFO, LIFO, weighted average, and specific identification) to compute ending inventory and cost of goods sold under each method using the perpetual system.
3. Compute gross profit earned by the company for each of the four costing methods in part 2. Also, report the inventory amount reported on the balance sheet for each of the four methods.
4. In preparing financial statements for year 2019, the financial officer was instructed to use FIFO but failed to do so and instead computed cost of goods sold according to LIFO, which led to a $1,400 overstatement in cost of goods sold from using LIFO. Determine the impact on year 2019’s income from the error. Also determine the effect of this error on year 2020’s income. Assume no income taxes.
5. Management wants a report that shows how changing from FIFO to another method would change net income. Prepare a table showing (1) the cost of goods sold amount under each of the four methods,
(2) the amount by which each cost of goods sold total is different from the FIFO cost of goods sold, and (3) the effect on net income if another method is used instead of FIFO.