Question

Hemming Co. reported the following current-year purchases and sales for its only product.

Date

Activities

Units Acquired at Cost

Units Sold at Retail

Jan.

1

Beginning inventory

255

units

@ $12.20

=

$

3,111

Jan.

10

Sales

210

units

@ $42.20

Mar.

14

Purchase

410

units

@ $17.20

=

7,052

Mar.

15

Sales

350

units

@ $42.20

July

30

Purchase

455

units

@ $22.20

=

10,101

Oct.

5

Sales

430

units

@ $42.20

Oct.

26

Purchase

155

units

@ $27.20

=

4,216

Totals

1,275

units

$

24,480

990

units

Exercise 6-7 Perpetual: Inventory costing methods-FIFO and LIFO LO P1

Required:
Hemming uses a perpetual inventory system.
  
1. Determine the costs assigned to ending inventory and to cost of goods sold using FIFO.
2. Determine the costs assigned to ending inventory and to cost of goods sold using LIFO.
3. Compute the gross margin for FIFO method and LIFO method.

Answer 1

a) Calculate cost assigned to Ending inventory and cost of goods sold under FIFO

Ending inventory (155*27.20+130*22.20)	7102
Cost of goods sold (24480-7102)	17378

b) Calculate cost assigned to Ending inventory and cost of goods sold under LIFO

Ending inventory (155*27.20+45*12.20+60*17.20+25*22.20)	6352
Cost of goods sold (24480-6352)	18128

c) Gross margin

	FIFO	LIFO
Sales	990*42.20 = 41778	41778
cost of goods sold	17378	18128
Gross margin	24400	23650