Question

Required information Exercise 5-5 Effect of inventory cost flow on ending inventory balance and gross margin LO 5-1 [The following information applies to the questions displayed below.] The Shirt Shop had the following transactions for T-shirts for 2018, its first year of operations: Jan. 20 Purchased Apr. 21 Purchased July 25 Purchased Sept. 19 Purchased 400 units 200 units 280 units 90 units @ @ @ @ $ 8 = $ 10 = $ 13 = $ 15 = $3,200 2,000 3,640 1,350 During the year, The Shirt Shop sold 810 T-shirts for $20 each. Exercise 5-5 Part 6 b. Compute the difference in gross margin between the FIFO and LIFO cost flow assumptions. FIFO LIFO Difference Gross margin

Answer 1

FIFO $ 8,270 LIFO $ 8,550 difference $ gross margin 280 PERIODIC FIFO Cost of goods available for sale cost of goods sold Ending Inventory Cost per Cost of goods available Cost per Cost of Ending Units unit for sale Units unit goods Sold Unit cost Inventory Jan-20 400 3200 400 3200 Apr-21 200 10 2000 2001 20000 10 Jul-25 280 3640 210 13 2730 70 13 910 Sep-19 90 1350 90 15 1350 10 970 10190 810 $ 7,930 160 $ 2,260 Sales 810 x 20 = 16200 cost of goods sold (FIFO) $ 7,930 gross margin $ 8,270 PERIODIC LIFO Cost of goods available for sale Cost per Cost of goods available Units unit for sale Jan-20 400 3200 Apr-21 200 2000 Jul-25 280 3640 Sep-19 90 1350 cost of goods sold Ending Inventory Cost per Cost of Ending Units unit goods Sold Unit cost Inventory 240 1920 1608 1280 200 2000 0 10 280 3640013 90 900 970) 10190 810 $ 7,650 160 $ 1,280 Sales 810 x 20 = cost of goods sold (FIFO) gross margin 16200 $ 7,650 $ 8,550 please comment if you have any doubt Please give thumps up if you satisfied with the answer