Question

Required information

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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

255

units

@ $12.20

=

$

3,111

Jan.

10

Sales

210

units

@ $42.20

Mar.

14

Purchase

410

units

@ $17.20

=

7,052

Mar.

15

Sales

350

units

@ $42.20

July

30

Purchase

455

units

@ $22.20

=

10,101

Oct.

5

Sales

430

units

@ $42.20

Oct.

26

Purchase

155

units

@ $27.20

=

4,216

Totals

1,275

units

$

24,480

990

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.

Step 1.

Goods Purchased Cost of Goods Sold Inventory Balance Date # of units Cost per unit # of units sold Cost per unit Cost of Goods Sold # of units Cost per unit Inventory Balance January 1 255 @ $12.20 = $3,111.00 January 10 March 14 March 15 July 30 October 5 October 26 Totals $0.00

Answer 1

Perpetual FIFO:
Date	Goods Purchased		Cost of Goods Sold			Inventory Balance
	# of Units	Cost per unit	# of units sold	Cost per unit	Cost of Goods Sold	# of units	Cost per unit	Inventory Balance
Jan. 1						255	$12.20	$3,111.00
Jan. 10			210	$12.20	$2,562	45	$12.20	$549.00
Mar. 14	410	$17.20				45	$12.20	$549.00
						410	$17.20	$7,052.00
Mar. 15			45	$12.20	$549.00
			305	$17.20	$5,246.00	105	$17.20	$1,806.00
July. 30	455	$22.20				105	$17.20	$1,806.00
						455	$22.20	$10,101.00
Oct. 5			105	$17.20	$1,806.00
			325	$22.20	$7,215.00	130	$22.20	$2,886.00
Oct. 26	155	$27.20				130	$22.20	$2,886.00
						155	$27.20	$4,216.00
Totals			990		$17,378.00	285		$7,102.00
Cost of goods sold is $17,378 and Ending Inventory is $7,102
Perpetual LIFO:
Date	Goods Purchased		Cost of Goods Sold			Inventory Balance
	# of Units	Cost per unit	# of units sold	Cost per unit	Cost of Goods Sold	# of units	Cost per unit	Inventory Balance
Jan. 1						255	$12.20	$3,111.00
Jan. 10			210	$12.20	$2,562	45	$12.20	$549.00
Mar. 14	410	$17.20				45	$12.20	$549.00
						410	$17.20	$7,052.00
Mar. 15						45	$12.20	$549.00
			350	$17.20	$6,020.00	60	$17.20	$1,032.00
July. 30	455	$22.20				45	$12.20	$549.00
						60	$17.20	$1,032.00
						455	$22.20	$10,101.00
Oct. 5						45	$12.20	$549.00
			430	$22.20	$9,546.00	60	$17.20	$1,032.00
						25	$22.20	$555.00
Oct. 26	155	$27.20				45	$12.20	$549.00
						60	$17.20	$1,032.00
						25	$22.20	$555.00
						155	$27.20	$4,216.00
			990		$18,128.00	285		$6,352.00
Cost of goods sold is $18,128 and Ending Inventory is $6,352

	FIFO	LIFO
Sales Revenue (210 + 350 + 430 = 990 * $42.20)	$41,778	$41,778
Less: Cost of Goods Sold	($17,378)	($18,128)
Gross Margin	$24,400	$23,650