Question

You have the following information for Sheridan Gems. Sheridan uses the periodic method of accounting for its inventory transactions. Sheridan only carries one brand and size of diamonds—all are identical. Each batch of diamonds purchased is carefully coded and marked with its purchase cost.

March   1       Beginning inventory 120 diamonds at a cost of $248 per diamond.
3       Purchased 160 diamonds at a cost of $280 each.
5       Sold 144 diamonds for $480 each.
10       Purchased 264 diamonds at a cost of $300 each.
25       Sold 312 diamonds for $520 each.

Costs of goods sold? $

Gross profit? $

Answer 1

Fifo method should be used here because it will maximize the profits in inflation times.

Cost of goods sold=$127360

Gross Profit=$104000