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		110	units	@ $2	=	$	220
	Jan.	3		Sales									90	units	@ $8
	Feb.	14		Purchase		156	units	@ $3	=	$	468
	Feb.	15		Sales									130	units	@ $8
	June	30		Purchase		160	units	@ $4	=	$	640
	Nov.	6		Sales									128	units	@ $8
	Nov.	19		Purchase		48	units	@ $5	=	$	240
				Totals		474	units			$	1,568		348	units

Required:
The company uses a perpetual 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.

Please answer nicely in excel thank you set up properly too

Answer 1

INVENTORY VALUATION BY FIFO METHOD
		PURCHASE			SALES			BALANCE
		Units	RPU ($)	($)	Units	RPU ($)	($)	Units	RPU ($)	($)
01-Jan	Opening Balance	110	2	220				110	2	220
03-Jan	Sales 90 units				90	2	180	20	2	40
14-Feb	Purchase 156 units	156	3	468				20	2	40
								156	3	468
15-Feb	Sales 130 units				20	2	40	46	3	138
					110	3	330
30-Jun	Purchase 160 Units	160	4	640				46	3	138
								160	4	640
06-Nov	Sales 128 Units				46	3	138	78	4	312
					82	4	328
19-Nov	Purchase 48 Units	48	5	240				78	4	312
								48	5	240
								Ending Inventory
	Total	474		1568	348		1016	78	4	312
								48	5	240

COGS= Opening Stock + Purchase - Closing Stock
COGS= 220 + 1348- 552
COGS = 1016
Gross Margin = Sales- COGS
Sales: 348* $ 7 = 2784
Gross Margin= 2784-1016
Gross Margin= 1768

INVENTORY VALUATION BY LIFO METHOD
		PURCHASE			SALES			BALANCE
		Units	RPU ($)	($)	Units	RPU ($)	($)	Units	RPU ($)	($)
01-Jan	Opening Balance	110	2	220				110	2	220
03-Jan	Sales 90 Units				90	2	180	20	2	40
14-Feb	Purchase 156 Units	156	3	468				156	3	468
								20	2	40
15-Feb	Sales 130 units				130	3	390	26	3	78
								20	2	40
30-Jun	Purchase 160 Units	160	4	640				160	4	640
								26	3	78
								20	2	40
06-Nov	Sales 128 Units				128	4	512	32	4	128
								26	3	78
								20	2	40
19-Nov	Purchase 48 Units	48	5	240				48	5	240
								32	4	128
								26	3	78
								20	2	40
								Ending Inventory
	Total	474		1,328	348		1,082	48	5	240
								32	4	128
								26	3	78
								20	2	40
								126		486

COGS= Opening Stock + Purchase - Closing Stock
COGS= 220 + 1148 - 486= 882
Gross Margin = Sales- COGS
Sales: 348* $ 7 = 2784
Gross Margin= 2784-882
Gross Margin= 1902