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 Acquired at Cost 205 units @ $10.20 - $ 2,091 Units sold at Retail 160 units @ $40.20 Date Activities Jan. 1 Beginning inventory Jan.10 Sales Mar.14 Purchase Mar.15 Sales July30 Purchase Oct. 5 Sales Oct.26 Purchase Totals 300 units @ $15.20 - 400 units e $20.20 - 4,560 8,080 250 units @ $40.20 375 units @ $40.20 105 units @ $25.20 - 1,010 units 2,646 $17,377 Required: Hemming uses a periodic inventory system. (a) Determine the costs assigned to ending inventory and to cost of goods sold using FIFO. (b) Determine the costs assigned to ending inventory and to cost of goods sold using LIFO. (c) Compute the gross margin for each method.

Answer 1

• Requirement [a] and [b]

FIFO	Cost of Goods available for sale			Cost of Goods Sold			Ending Inventory
	Units	Cost/unit	COG for sale	Units sold	Cost/unit	COGS	Units	Cost/unit	Ending inventory
Beginning Inventory	205	$                10.20	$                        2,091.00	205	$               10.20	$                 2,091.00	0	$                 10.20	$                         -
Purchases:
14-Mar	300	$                15.20	$                        4,560.00	300	$               15.20	$                 4,560.00	0	$                 15.20	$                         -
30-Jul	400	$                20.20	$                        8,080.00	280	$               20.20	$                 5,656.00	120	$                 20.20	$            2,424.00
26-Oct	105	$                25.20	$                        2,646.00		$               25.20	$                              -	105	$                 25.20	$            2,646.00
TOTAL	1010		$                      17,377.00	785		$               12,307.00	225		$            5,070.00
LIFO	Cost of Goods available for sale			Cost of Goods Sold			Ending Inventory
	Units	Cost/unit	COG for sale	Units sold	Cost/unit	COGS	Units	Cost/unit	Ending inventory
Beginning Inventory	205	$                10.20	$                        2,091.00	0	$               10.20	$                              -	205	$                 10.20	$            2,091.00
Purchases:
14-Mar	300	$                15.20	$                        4,560.00	280	$               15.20	$                 4,256.00	20	$                 15.20	$                304.00
30-Jul	400	$                20.20	$                        8,080.00	400	$               20.20	$                 8,080.00	0	$                 20.20	$                         -
26-Oct	105	$                25.20	$                        2,646.00	105	$               25.20	$                 2,646.00	0	$                 25.20	$                         -
TOTAL	1010		$                      17,377.00	785		$               14,982.00	225		$            2,395.00

• Requirement [c]

	FIFO	LIFO
Sales Revenue	$    31,557.00	$            31,557.00
(-) Cost of Goods Sold (as calculated above)	$    12,307.00	$            14,982.00
Gross Margin	$    19,250.00	$            16,575.00