Question

Required information [The following information applies to the questions displayed below.] Hemming Co. reported the following current-year purchases and sales for its only product. Units Sold at Retail Units Acquired at Cost 285 units @ $13. 40 = $ 3, 819 250 units @ $43. 40 470 units @ $18.40 = 8,648 Date Activities Jan. 1 Beginning inventory Jan. 10 Sales Mar. 14 Purchase Mar. 15 Sales July 30 Purchase Oct. 5 Sales Oct. 26 Purchase Totals 400 units @ $43. 40 485 units @ $23.40 = 11,349 460 units @ $43. 40 = 185 units @ $28.40 1, 425 units 5,254 $29,070 1,110 units equired: emming uses a perpetual inventory system. Determine the costs assigned to ending inventory and to cost of goods sold using FIFO. - Determine the costs assigned to ending inventory and to cost of goods sold using LIFO. -Compute the gross margin for FIFO method and LIFO method.

Answer 1

Ans. 1	FIFO:	Purchase			Cost of goods sold			Balance
	Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	1-Jan	285	$13.40	$3,819				285	$13.40	$3,819
	10-Jan				250	$13.40	$3,350	35	$13.40	$469
	14-Mar	470	$18.40	$8,648				35	$13.40	$469
								470	$18.40	$8,648
	15-Mar				35	$13.40	$469
					365	$18.40	$6,716	105	$18.40	$1,932
	30-Jul	485	$23.40	$11,349				105	$18.40	$1,932
								485	$23.40	$11,349
	5-Oct				105	$18.40	$1,932
					355	$23.40	$8,307	130	$23.40	$3,042
	26-Oct	185	$28.40	$5,254				130	$23.40	$3,042
								185	$28.40	$5,254
	Total				Cost of goods sold		$20,774	Ending inventory		$8,296
	*In FIFO method the units that have purchased first, are released the first one and the ending inventory
	units remain from the last purchases.
Ans. 2	LIFO:	Purchase			Cost of goods sold			Balance
	Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	1-Jan	285	$13.40	$3,819				285	$13.40	$3,819
	10-Jan				250	$13.40	$3,350	35	$13.40	$469
	14-Mar	470	$18.40	$8,648				35	$13.40	$469
								470	$18.40	$8,648
	15-Mar				400	$18.40	$7,360	35	$13.40	$469
								70	$18.40	$1,288
	30-Jul	485	$23.40	$11,349				35	$13.40	$469
								70	$18.40	$1,288
								485	$23.40	$11,349
	5-Oct				460	$23.40	$10,764	35	$13.40	$469
								70	$18.40	$1,288
								25	$23.40	$585
	26-Oct	185	$28.40	$5,254				35	$13.40	$469
								70	$18.40	$1,288
								25	$23.40	$585
								185	$28.40	$5,254
	Total				Cost of goods sold		$21,474	Ending inventory		$7,596
	*In LIFO method the units that have purchased last, are released the first one and the ending inventory
	units remain from the first purchases.
Ans. 3			FIFO	LIFO
	Sales		$48,174	$48,174
	(-) Cost of goods sold		($20,774)	($21,474)
	Gross margin		$27,400	$26,700
	*Calculation of sales:
	Date	Units	Rate	Cost
	10-Jan	250	$43.40	$10,850
	15-Mar	400	$43.40	$17,360
	5-Oct	460	$43.40	$19,964
	Total sales			$48,174