Question

Problem 5-20A Allocating product costs between cost of goods sold and ending inventory: intermittent purchases and sales of merchandise LO 5-1

[The following information applies to the questions displayed below.]

Pam’s Creations had the following sales and purchase transactions during Year 2. Beginning inventory consisted of 270 items at $95 each. The company uses the FIFO cost flow assumption and keeps perpetual inventory records.
  

Date	Transaction	Description
Mar. 5	Purchased	250 items @	$	105
Apr. 10	Sold	145 items @	$	205
June 19	Sold	265 items @	$	205
Sept. 16	Purchased	200 items @	$	110
Nov. 28	Sold	135 items @	$	210

Problem 5-20A Part b

b. Calculate the gross margin Pam’s Creations would report on the Year 2 income statement. (Amounts to be deducted should be indicated with a minus sign.)
  

Sales	$112,400selected answer correct
Cost of goods sold	54,650selected answer incorrect
Gross margin	$57,750selected answer correct

Answer 1

Cost of goods sold is to be written with a minus sign
b
Sales	112400
Cost of goods sold	(54650)
Gross margin	57750
Workings:
Sales revenue:
	Units	Price	Total
Apr. 10	145	205	29725
June 19	265	205	54325
Nov. 28	135	210	28350
Total	545		112400
Cost of goods sold:
	Units	Unit Cost	Total
Beg. Inv.	270	95	25650
Mar. 5	250	105	26250
Sept. 16	25	110	2750
Total	545		54650