Question

Tree Seedlings has 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		42	units	@ $2	=	$	84
	Jan.	3		Sales									32	units	@ $8
	Feb.	14		Purchase		80	units	@ $3	=	$	240
	Feb.	15		Sales									70	units	@ $8
	June	30		Purchase		170	units	@ $4	=	$	680
	Nov.	6		Sales									134	units	@ $8
	Nov.	19		Purchase		22	units	@ $5	=	$	110
				Totals		314	units			$	1,114		236	units

Required:
The company 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

a.

Closing Stock (FIFO)
Qty	Rate	Amount
22.00	5.00	110.00
56.00	4.00	224.00
78.00		334.00

COGS (FIFO)
Qty	Rate	Amount
42.00	2.00	84.00
80.00	3.00	240.00
114.00	4.00	456.00
236.00		780.00

b.

Closing Stock LIFO
Qty	Rate	Amount
42.00	2.00	84.00
36.00	3.00	108.00
78.00		192.00

COGS (LIFO)
Qty	Rate	Amount
44.00	3.00	132.00
170.00	4.00	680.00
22.00	5.00	110.00
236.00		922.00

c.

	FIFO	LIFO
Sales	1,888.00	1,888.00
COGS	780.00	922.00
Gross Margin	1,108.00	966.00