Question

Below are purchases and sales for Hector retail company for the year 2020.

January 1    purchased    10   UNITS at $20 each

January 2  purchased       20  UNITS at $25 each

January  3  purchased        20 UNITS at $ 30 each

January  4   Sold                    25 UNITS at $ 50 each

(A)

USING FIRST IN FIRST OUT METHOD (FIFO) DETERMINE THE FOLLOWING:

A,.COST OF GOOS SOLD

B. COST OF ENDING INVENTORY

C. GROSS PROFIT

(B)

USING LAST IN FIRST OUT METHOD (LIFO)

1. COST OF ENDING INVENTORY
2. COST OF GOODS SOLD
3. GROSS PROFIT

Answer 1

Answer :

1) computation of Ending inventory ,COGS and Gross profit under FIFO method :

		Purchases			COGS			Ending
Date	qty	rate	Amount	qty	Rate	Amount	Qty	rate	Amount
1 jan	10	20	200				10	20	200
2 jan	20	25	500				10	20	200
							20	25	500
3 jan	20	30	600				10	20	200
							20	25	500
							20	30	600
4 jan				10	20	200
				15	25	375	5	25	125
							20	30	600
				25		575	25		725

Therefore, under FIFO

A) cost of goods sold = 575

B) Ending inventory = 725

C) Gross profit = (25 × 30) - 575 = 1250 - 575 = 675

2) computation of Ending inventory ,COGS and Gross profit under LIFO method :

		Purchases			COGS			Ending
Date	qty	rate	Amount	qty	Rate	Amount	Qty	rate	Amount
1 jan	10	20	200				10	20	200
2 jan	20	25	500				10	20	200
							20	25	500
3 jan	20	30	600				10	20	200
							20	25	500
							20	30	600
4 jan				20	30	600
				5	25	125	15	25	375
							10	20	200
				25		725	25		575

Therefore, under LIFO

A) cost of goods sold = 725

B) Ending inventory = 575

C) Gross profit = (25 × 30) - 725 = 1250 - 725 = 525