Question

im lost on how to do the blank questions

Fred's Canned Corn Emporium - A purveyor of the finest canned corn in Manhattan, KS for over 25 years. Read through the following narrative of Fred's activities. Answer the following questions and fill out the attached Inventory card along the way. At the beginning of the year, Fred has 25 cans of corn on hand that cost him $5 per can. On January Feed purchases 20 cans of corn from lowa's Best Corn for $5.50 per can. The freight cost to get the corn from lowa to Fred's store was $10 total, and shipping terms were FOB lowa. The order shows up at the store the next day, and it takes the stock boy 1 hour to stock the new order on the shelves (and he is paid 5B hour) On the 8. Fred sells 20 cans at $10 apiece on open account. On the 9", Fred sells 18 cans at $10 apiece for cash. On January 10, Fred buys 25 more cans from lowa's Best for $7 per can. The freight cost to get the corn from lowa to Fred's store was $10 total, and shipping terms were FOB Manhattan. The order shows up the next day, and it takes the stock boy 1 hour to stock the new order on the shelves. On the 12", Fred sells 12 cans at $10 aplece on open account. Nothing else happens in the month of January for Fred's Canned Corn Emporium. 1. For the January 5"event, what costs are inventoriable? What will be the cost per can? Record it on the inventory card provided. The cornis inventoriale The cost is $6.40 2. Assume we are in a time of rising corn prices. We want to use the cost flow assumption that will give us the lowest cost of goods sold and the highest net income. What cost flow assumption should we use? fifo 3. We will be using Perpetual LIFO or FIFO (depending on your answer from 12) because that is what we have learned in class. In reality, depending on what the nature of our product is, would we use perpetual or periodic? Periodic 4. Using the inventory card to find COGS, what journal entries should be made to record the January 8° sale? 5. Using the inventory card to find COGS, what journal entries should be made to record the January 9" sale?

i just need the gross margin question explained

Answer 1

	Inventory events				Cost of Sales				Inventory Balances
	Units	Cost/Unit	Total		Units	Cost/Unit	Total		Units	Cost/Unit	Total
Opening Stock	25.00	5.00	125.00						25.00	5.00	125.00
Purchase Inventory	20.00	6.40	128.00						45.00	5.62	253.00
Sales @ 10/unit	20.00				20.00	5.00	100.00		5.00	5.00	25.00
									20.00	6.40	128.00
Sales @ 10/unit	18.00				5.00	5.00	25.00
					13.00	6.40	83.20		7.00	6.40	44.80
Purchase Inventory	25.00	7.72	193.00						7.00	6.40	44.80
									25.00	7.72	193.00
Sales @ 10/unit	12.00				7.00	6.40	44.80
					5.00	7.72	38.60		20.00	7.72	154.40
	COGS available for sale		446.00		COGS		291.60		Inventory in hand		154.40

1	Cost = $6.40/ can with total value of $128
2	FIFO Method should be used as low stock value (old stock) shall be used first to make sales, leading to higher profits
3	Periodic should be used

4	Journal
S No	Particulars	Dr/Cr.	Dr ($)	Cr ($)
	Cash A/c	Dr	200
	To Cost of Sales A/c	Cr		100
	To Profit on Sales A/c	Cr		100
	(Being sales recorded)
5	Journal
S No	Particulars	Dr/Cr.	Dr ($)	Cr ($)
	Cash A/c	Dr	180
	To Cost of Sales A/c	Cr		108
	To Profit on Sales A/c	Cr		72
	(Being sales recorded)

6	Cost = $7.72/ can with total value of $193

7	Journal
S No	Particulars	Dr/Cr.	Dr ($)	Cr ($)
	Cash A/c	Dr	120
	To Cost of Sales A/c	Cr		83
	To Profit on Sales A/c	Cr		37
	(Being sales recorded)

8	Cost of Goods available for Sale = $446
9	Cost of Goods Sold = $291.60, which shall come in Income Statement as cost.
10	Ending Inventory is $154.40 which shall come on Asset Side of Balance Sheet

11	Gross Margin
	Sales	Amount ($)
	20 units	200.00
	18 units	180.00
	12 units	120.00
	Total Sales	500.00
	COGS	291.60
	Gross Margin (Total Sales - COGS)	208.40