Question

Required information

Use the following information for the Exercises below.

[The following information applies to the questions displayed below.]
  
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

260

units

@ $12.40

=

$

3,224

Jan.

10

Sales

215

units

@ $42.40

Mar.

14

Purchase

420

units

@ $17.40

=

7,308

Mar.

15

Sales

380

units

@ $42.40

July

30

Purchase

460

units

@ $22.40

=

10,304

Oct.

5

Sales

425

units

@ $42.40

Oct.

26

Purchase

160

units

@ $27.40

=

4,384

Totals

1,300

units

$

25,220

1,020

units

Exercise 5-7 Perpetual: Inventory costing methods-FIFO and LIFO LO P1

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.

Answer 1

FIFO
	transaction	purchase			cost of goods sold			balanced inventory
date		unit	rate per unit	total	unit	rate per unit	total	unit	rate per unit	total
01-Jan	beginning	260	12.4	3,224	-	-	-	260	12.4	3,224
10-Jan	sale	-	-	-	215	12.4	2,666	45	12.4	558
14-Mar	purchase	420	17.4	7,308	-	-	-	45	12.4	558
								420	17.4	7,308
15-Mar	sale	-	-	-	45	12.4	558
					335	17.4	5,829	85	17.4	1,479
30-Jul	purchase	460	22.4	10,304	-	-	-	85	17.4	1,479
								460	22.4	10,304
05-Oct	sale	-	-	-	85	17.4	1479
					340	22.4	7616	120	22.4	2,688
26-Oct	purchase	160	27.4	4384	-	-	-	120	22.4	2,688
								160	27.4	4384
		1,300		25,220	1,020		18,148	280		7,072

LIFO
	transaction	purchase			cost of goods sold			balanced inventory
date		unit	rate per unit	total	unit	rate per unit	total	unit	rate per unit	total
01-Jan	beginning	260	12.4	3,224	-	-	-	260	12.4	3,224
10-Jan	sale	-	-	-	215	12.4	2,666	45	12.4	558
14-Mar	purchase	420	17.4	7,308	-	-	-	45	12.4	558
								420	17.4	7,308
15-Mar	sale	-	-	-	380	17.4	6,612	45	12.4	558
								40	17.4	696
30-Jul	purchase	460	22.4	10,304	-	-	-	45	12.4	558
								40	17.4	696
								460	22.4	10,304
05-Oct	sale	-	-	-	425	22.4	9520	45	12.4	558
								40	17.4	696
								35	22.4	784
26-Oct	purchase	160	27.4	4384	-	-	-	45	12.4	558
								40	17.4	696
								35	22.4	784
								160	27.4	4384
		1,300		25,220	1,020		18,798	280		6,422

Gross margin (FIFO)
Sale (1,020 x 42.40)	43,248
Less: cost of goods sold	18,148
Gross margin	25,100

Gross margin (LIFO)
Sale (1,020 x 42.40)	43,248
Less: cost of goods sold	18,798
Gross margin	24,450