Dugan Sales had the following transactions for jackets in 2013, its first year o

Question

Dugan Sales had the following transactions for jackets in 2013, its first year of operations: Jan 20 Purchased 80 units @ $15 = $1,200, Apr 21 Purchased 420 units @ $16= $6,720, Jul 25 Purchased 250 units @ $20 = $5,000, Sept 19 Purchased 150 units @ $22 = $3,300. During the year, Dugan sales sold 830 jackets for $40 each. a. Compute the amount of ending inventory Dugan would report on the balance sheet, assuming the following cash flow assumptions: (1) FIFO, (2) LIFO, and (3) weighted average. b. Record the above transactions in general journal form and post to T-accounts using (1) FIFO, (2) LIFO, and (3) weighted average. Use a separate set of journal entries and T-accounts for each method. Assume all transactions are cash transactions. c. Compute the difference in gross margin between the FIFI and LIFO cost flow assumptions.

Explanation / Answer

a) FIFO=1540=70*22

LIFO =70*15=1050

Weighted average=16220/900*70=1261.55

c)1540-1050=490   

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