E6-5 Catlet Co. uses a periodic inventory system. Its records show the following for the month of May, in which 65 units were sold. Units Unit Cost Total Cost May 1 Inventory 30 $ 8 $240 15 Purchases 25 11 275 24 Purchases 35 12 420 Totals 90 $935 Compute

E6-5 Catlet Co. uses a periodic inventory system. Its records show the following for the month of May, in which 65 units were sold. Units Unit Cost Total Cost May 1 Inventory 30 $ 8 $240 15 Purchases 25 11 275 24 Purchases 35 12 420 Totals 90 $935 Compute inventory and cost of goods sold using FIFO and LIFO. (SO 2) Instructions Compute the ending inventory at May 31 and cost of goods sold using the FIFO and LIFO methods. Prove the amount allocated to cost of goods sold under each method.

E6-12 Staley Watch Company reported the following income statement data for a 2-year period. 2008 2009 Sales $210,000 $250,000 Cost of goods sold Beginning inventory 32,000 44,000 Cost of goods purchased 173,000 202,000 Cost of goods available for sale 205,000 246,000 Ending inventory 44,000 52,000 Cost of goods sold 161,000 194,000 Gross profit $ 49,000 $ 56,000 Staley uses a periodic inventory system. The inventories at January 1, 2008, and December 31, 2009, are correct. However, the ending inventory at December 31, 2008, was overstated $5,000. Instructions (a) Prepare correct income statement data for the 2 years. (b) What is the cumulative effect of the inventory error on total gross profit for the 2 years? (c) Explain in a letter to the president of Staley Company what has happened—i.e., the nature of the error and its effect on the financial statements.