Week 7 Accounting Workshop: Costing the Helmets Three Ways

Part 1 — The Big Picture

This week you learned that when a business buys the same item at different costs, a cost flow assumption decides which costs count as sold and which stay on the shelf. In this workshop you cost one small stock of goods end to end: the bicycle shop's 100 helmets, bought in three layers at rising costs. You build the layers in a free spreadsheet, compute cost of goods sold, ending inventory, and gross profit by FIFO, LIFO, and weighted average with every total by formula, check that each method splits the same cost of goods available for sale, apply the lower of cost and net realizable value, read what the schedule shows in one plain sentence, and then check a chatbot's version of the same work. This is the analyze-and-explain mode of the Accounting Workshop: the method comparison carries the weight, and the record-and-post and adjust-and-report habits from earlier weeks carry forward into the formulas and the write-down.

Time budget: Plan for about 90 minutes.

Part 2 — The Task

Guiding question: How do FIFO, LIFO, and weighted average split the bicycle shop's same helmet costs between the income statement and the balance sheet, and what does each split show a reader?

Workshop data: Dataset D, the bicycle shop's helmet layers (illustrative)

Source: The running case's helmet stock: an illustrative, unnamed bicycle repair and sales shop, organized as a corporation, that uses a periodic system for its helmets; it describes no real business.

• Rows: 3 cost layers of helmets (100 helmets in all); the layer table has 3 rows, the method schedule has 3 rows, and the write-down table has 2 rows
• Beginning inventory: 20 helmets at $30 each
• Purchase 1: 40 helmets at $33 each
• Purchase 2: 40 helmets at $36 each
• Sales: 70 helmets sold at $50 each; 30 helmets remain
• Net realizable value: $34 a helmet at period end, net of selling costs

Part 3 — Materials & Procedure

Tools and materials

• A free spreadsheet (Google Sheets, or any free spreadsheet) for journals, T-accounts, trial balances, schedules, and statements, with every total computed by formula; the SEC's free EDGAR search for public companies' annual reports; and one approved chatbot used as a sparring partner whose entries, totals, and claims about standards and tax rates the student checks by hand and against the pinned source before trusting them
• A free spreadsheet (Google Sheets, or any free spreadsheet)
• One approved chatbot

Ways of working

• record-and-post
• adjust-and-report
• analyze-and-explain

Procedure

1. Read Dataset D in Part 2 twice. Write one line saying which layer is oldest, which is newest, and whether each purchase cost more or less than the one before. Check: One line naming the beginning inventory as oldest, Purchase 2 as newest, and costs rising with each purchase.
2. Open a new sheet and copy the layer table from Part 4. Enter each layer's units and unit cost, compute each layer's cost with a formula, and total the units and the costs with SUM formulas. Tool: A free spreadsheet (Google Sheets, or any free spreadsheet). Check: Three layer costs computed by formula and two totals: the units available and the cost of goods available for sale.
3. On a second tab, copy the method schedule. For FIFO and LIFO, write the layers each method counts out first and compute cost of goods sold by formula; for weighted average, compute the unit cost as total cost divided by total units, then cost of goods sold. Compute ending inventory as the cost of goods available for sale minus cost of goods sold, and gross profit as sales minus cost of goods sold. Tool: A free spreadsheet (Google Sheets, or any free spreadsheet). Check: Each method's row filled with formulas, and a check cell in each row that adds cost of goods sold and ending inventory and returns the same total as step 2.
4. Copy the write-down table. Compute the net realizable value of the 30 helmets by formula, compare it with FIFO and with weighted-average ending inventory using a MIN formula, and compute any write-down. Tool: A free spreadsheet (Google Sheets, or any free spreadsheet). Check: The reported amount for each method is the lower of its cost and the net realizable value, and the write-down column shows the difference or zero.
5. Answer the analysis questions in Part 5, including the plain sentence that says what the schedule shows and how a different allowed method would change it. Check: Written answers to all five questions.
6. Paste your three tables and then the Part 6 prompt into one approved chatbot. Compare every figure, every entry, and every claim about a standard or a rate with your own work and with Chapter 7, and write the critique report, or complete the equivalent route instead. Tool: One approved chatbot. Check: A three-to-five-sentence report that quotes at least two of the chatbot's slips and corrects each by hand, or the marked-up equivalent-route analysis.

Fallback route

When to use it: Use this route if you cannot open a spreadsheet or print the tables.

Copy the three tables by hand onto paper or into any text file, read Dataset D from this page, compute each layer, each method's figures, and each write-down by hand, add each check twice, and complete every analysis question and the critique step in the same order. Submit a photo or scan of the paper, or the text file, for equal credit.

This route earns the same credit as the primary route.

Part 4 — The Scaffold

Build the layers first, so every later figure can be traced back to a units-times-cost product and one total.

Student scaffold table 1

Layer	Units	Unit cost	Cost of the layer
Beginning inventory	20	$30
Purchase 1	40	$33
Purchase 2	40	$36

Cost the same 70 helmets three ways, so the check column shows each method splitting the same total and the gross profit column shows where the difference lands.

Student scaffold table 2

Method	Layers or unit cost used for the 70 sold	Cost of goods sold	Ending inventory	Check: sold plus ending	Gross profit
FIFO
LIFO
Weighted average

Test each eligible method against what the 30 helmets are expected to bring in, so the balance sheet never reports them above that amount.

Student scaffold table 3

Method	Ending inventory at cost	Net realizable value of 30 helmets	Amount reported	Write-down
FIFO
Weighted average

Part 5 — Analysis Questions

1. Compute cost of goods sold, ending inventory, and gross profit under FIFO, LIFO, and weighted average, showing the layers or the unit cost behind each cost of goods sold figure.
2. Compute the net realizable value of the 30 helmets and apply the lower of cost and net realizable value to FIFO and to weighted average, showing any write-down.
3. Explain why every method's cost of goods sold plus ending inventory returns the same total, and why FIFO's ending inventory is the highest of the three when costs rise.
4. Write one plain sentence saying what your schedule shows. Then say how switching from FIFO to LIFO would change cost of goods sold, ending inventory, and gross profit, without ranking either method, and why the shop would keep one method from period to period.
5. Choose one reflection: (a) which figure did your first instinct get wrong, and what check changed your mind? or (b) name one thing this schedule cannot tell a lender, and one input in Dataset D that a lender might question.

Part 6 — AI-Critique Moment

Choose one equal-credit critique route. Route A: ask an approved AI tool to critique your completed work, then check its response against your own evidence. Route B is the no-AI equivalent printed below.

Approved tools: Claude, Gemini, ChatGPT, Grok, Microsoft Copilot.

Prompt to paste:

I've pasted my completed cost flow schedules above. Here is an illustrative bicycle shop that uses a periodic system for helmets. It starts with 20 helmets that cost $30 each, buys 40 at $33 and then 40 at $36, and sells 70 helmets at $50 each, leaving 30. Please compute cost of goods sold, ending inventory, and gross profit under FIFO, LIFO, and weighted average. At period end the shop expects to receive $34 a helmet, net of selling costs: apply the lower of cost and net realizable value to FIFO and to weighted average, and write the journal entry for any write-down, saying which period's expense it is. Then answer these: Does FIFO leave the shop with more cash than LIFO? Where do ending inventory and cost of goods sold go on the financial statements? Which standard sets the lower-of-cost rule, and does it also apply to LIFO? Could the shop use LIFO if it reported under IFRS? If a customer had paid in advance for helmets the shop will deliver next period, would that payment be sales revenue this period? What Social Security rate and wage base apply to the mechanic who stocks the helmets? And does the $200 of monthly depreciation on the shop's repair equipment tell us what the equipment would sell for?

Test the response for these likely failures:

• Chatbots often average the three unit prices, (30 + 33 + 36) ÷ 3 = $33, and report weighted-average cost of goods sold of 70 × 33 = $2,310.
• Chatbots sometimes say a company reporting under IFRS may use LIFO if it discloses the method.
• Chatbots often say the lower of cost and net realizable value applies to every method, LIFO included, or attribute it to a rule that does not exist.
• Chatbots sometimes debit Inventory for the write-down, as if the asset grew.
• Chatbots sometimes write the write-down with unequal sides, such as an expense of $60 against Inventory of $1,020, mixing up the write-down and the new balance.
• Chatbots sometimes push the $60 write-down into the next period, when the helmets are finally sold.
• Chatbots often say FIFO leaves the shop with $150 more cash than LIFO because its gross profit is $150 higher.
• Chatbots sometimes list ending inventory as a long-term asset or as an expense on the income statement.
• Chatbots sometimes count a customer's advance payment for helmets not yet delivered as this period's sales revenue.
• Chatbots often quote an earlier year's Social Security wage base when asked about the mechanic.
• Chatbots often describe the $200 of monthly depreciation as the drop in what the repair equipment would sell for.

Write three to five sentences naming what the chatbot got right and at least two places where it slipped into one of the failures above, quoting its words and correcting each by hand against Dataset D, Chapter 7, and the pinned source.

Equivalent route (no AI required)

No AI account is required for this workshop. This route assesses the same objectives, Objective 5 (account for merchandising operations and inventory: record purchases and sales in a perpetual system, compute cost of goods sold and gross profit, and apply FIFO, LIFO, and weighted-average costing and the lower of cost and net realizable value) and Objective 1 (explain the purpose of financial accounting, its users, the forms of business organization, the roles of GAAP, the FASB, the SEC, and IFRS, and the ethical principles that guide accountants), takes comparable effort of about the same 90 minutes, uses the same rubric, and earns the same credit. Instead of the chatbot, critique this flawed analysis of Dataset D, printed here in full: "Under FIFO the shop sells its newest helmets first, so cost of goods sold is 40 × 36 + 30 × 33 = $2,430 and ending inventory is $930. Under LIFO the oldest go first: 20 × 30 + 40 × 33 + 10 × 36 = $2,280. Weighted average uses (30 + 33 + 36) ÷ 3 = $33, so cost of goods sold is 70 × 33 = $2,310. Because FIFO shows the higher gross profit, it also leaves the shop with $150 more cash. LIFO is fine under IFRS too, and the lower of cost and net realizable value applies to every method under the FASB's inventory rule. At $34 a helmet, the FIFO write-down is recorded as debit Inventory 60, credit Cost of Goods Sold 1,020, and it can wait until the helmets are sold next period. Ending inventory is a long-term asset. A customer's advance payment for helmets to be delivered next period counts as sales revenue now. The mechanic's Social Security is 6.2 percent on wages up to $168,600, and the $200 of monthly depreciation shows the repair equipment lost $200 of resale value." Mark every error you find, name the failure it shows, and correct it by hand against Dataset D, Chapter 7, and the pinned source; find at least two. The wage base in it is out of date on purpose and is itself one of the errors. Submit the marked-up analysis with your corrections in place of the chatbot report and share link.

Part 7 — What to Submit

• The completed layer table, method schedule, and write-down table from Part 4
• Written answers to all five analysis questions
• The chatbot critique report with its share link, or the equivalent route's marked-up flawed analysis

Deliverable:

A short Accounting Workshop report on the bicycle shop's helmets: three completed tables (the layers, the three-method schedule, and the write-down test), written answers to five analysis questions, and a critique of a chatbot's version of the same costing, or, on the equivalent route, a marked-up correction of the printed flawed analysis. Choose how you show it: a completed spreadsheet with written answers, a recorded explanation with a transcript, or hand-drawn tables with short notes; every form is graded by the same scoring criteria. Submit in any accessible file type or as a link; a recorded response may be submitted as audio or video with a transcript, or as text.

Rubric

The rubric below shows how each submitted part is evaluated; bands are full, partial, or none.

Workshop evaluation criteria

Criterion	Full	Partial	None
Cost flow schedules, computed and checked	All three methods have the right cost of goods sold, ending inventory, and gross profit, each traced to its layers or unit cost, and every check returns the cost of goods available for sale.	Two methods are right, or all three are present but one figure is wrong or a method counts its layers in the wrong order.	Fewer than two methods are computed, or the checks do not return the same total.
Lower of cost and net realizable value applied	Net realizable value is computed for the 30 helmets, FIFO is written down to the lower amount, weighted average is correctly left at cost, and the test is applied only to those two methods.	The test is applied to one method correctly, or the write-down is computed but the reported amount or the eligible methods are wrong.	No write-down test, or a write-down that raises the reported amount.
Plain-sentence reading and the effect of another method	One plain sentence says what the schedule shows, and the answer says how switching from FIFO to LIFO changes cost of goods sold, ending inventory, and gross profit, with a reason for consistency, ranking neither method.	The plain sentence or the method effect is present, but not both, or one of them ranks a method or is vague.	Neither the plain sentence nor the method effect is present.
Caught-and-corrected AI slip, on either route	The chatbot critique report, or the equivalent route's marked-up flawed analysis, quotes at least two errors and corrects each by hand against Dataset D, Chapter 7, and the pinned source; either route earns this band equally.	One error is quoted and corrected on either route, or errors are named without a correction.	No critique on either route, or chatbot output is pasted without checking it.
Limits and reflection	The answers explain why every method splits the same total and why FIFO's ending inventory is highest when costs rise, and the chosen reflection option is answered with a specific figure or input from Dataset D.	Either the explanation or the reflection is present, but not both, or one is general.	Neither the explanation nor the reflection is present.

Quality Gate

• Every layer cost, cost of goods sold, ending inventory, and gross profit is computed by formula or written as a product or sum.
• Each method's cost of goods sold plus ending inventory equals the cost of goods available for sale.
• FIFO counts the oldest layers out first and LIFO the newest, and weighted average divides total cost by total units.
• The write-down is applied only to FIFO and weighted average, and the reported amount is the lower of cost and net realizable value.
• No standard, rule, rate, statistic, or quotation is invented anywhere in the submission.
• The plain-sentence reading describes each method's effect and ranks no allowed method as better.
• The critique quotes the chatbot or the flawed analysis and corrects at least two errors by hand.