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

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 205 units @ $10.20 = $ 2,091 Jan. 10 Sales 160 units @ $40.20 Mar. 14 Purchase 300 units @ $15.20 = 4,560 Mar. 15 Sales 250 units @ $40.20 July 30 Purchase 400 units @ $20.20 = 8,080 Oct. 5 Sales 375 units @ $40.20 Oct. 26 Purchase 105 units @ $25.20 = 2,646 Totals 1,010 units $ 17,377 785 units 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.

Explanation / Answer

1)FIFO Date Description Units Unit cost Total Jan 1 Begning inventory 205 10.2 2091 Jan 10 Sale -160 10.2 -1632 Jan 10 available inventory 45 10.2 459 Mar 14 Purchase 300 15.2 4560 Mar 15 Sale -45 10.2 -459 Sale -205 15.2 -3116 Mar 15 available inventory 95 15.2 1444 Jul 30 Purchase 400 20.2 8080 Oct 5 Sale -95 15.2 -1444 -280 20.2 -5656 Oct 5 available inventory 120 20.2 2424 Oct 26 Purchase 105 25.2 2646 Oct 31 Ending inventory 120 20.2 2424 105 25.2 2646 Total 225 5070 Cost of Goods sold = Beginning inventory+Total purchases - Ending inventory Beginning inventory = $2091 Total purchases = 4560+8080+2646 = $15286 Ending inventory = $5070 Cost of goods sold = $2091+$15286-$5070 = $12307 2) LIFO Date Description Units Unit cost Total Jan 1 Begning inventory 205 10.2 2091 Jan 10 Sale -160 10.2 -1632 Jan 10 available inventory 45 10.2 459 Mar 14 Purchase 300 15.2 4560 Mar 15 Sale -250 15.2 -3800 Mar 15 available inventory 45 10.2 459 50 15.2 760 Jul 30 Purchase 400 20.2 8080 Oct 5 Sale -375 20.2 -7575 Oct 5 available inventory 45 10.2 459 50 15.2 760 25 20.2 505 Oct 26 Purchase 105 25.2 2646 Oct 31 Ending inventory 45 10.2 459 50 15.2 760 25 20.2 505 105 25.2 2646 Total 225 4370 Cost of Goods sold = Beginning inventory+Total purchases - Ending inventory Beginning inventory = $2091 Total purchases = 4560+8080+2646 = $15286 Ending inventory = $4370 Cost of goods sold = $2091+$15286-$4370 = $13007 3) Gross margin = Sales revenue - Cost of goods sold Sales revenue = (160*40.2)+(250*40.2)+(375*40.2) = $31557 Gross margin; FIFO = $31557-$12307 = $19250 LIFO = $31557-$13007 = $18550

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