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		50	units	@ $2	=	$	100
	Jan.	3		Sales									34	units	@ $8
	Feb.	14		Purchase		78	units	@ $3	=	$	234
	Feb.	15		Sales									70	units	@ $8
	June	30		Purchase		100	units	@ $4	=	$	400
	Nov.	6		Sales									92	units	@ $8
	Nov.	19		Purchase		24	units	@ $5	=	$	120
				Totals		252	units			$	854		196	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.

Answer 1

STATEMENT SHOWING INVENTORY RECORD UNDER PERPETUAL FIFO METHOD
	RECIEPTS	COST OF GOODS SOLD	BALANCE
DATE	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $
01-Jan							50	2	100
03-Jan				34	2	68	16	2	32
14-Feb	78	3	234				16	2	32
							78	3	234
15-Feb				16	2	32
				54	3	162	24	3	72
30-Jun	100	4	400				24	3	72
							100	4	400
06-Nov				24	3	72
				68	4	272	32	4	128
19-Nov	24	5	120				32	4	128
							24	5	120
TOTAL	202		754	196		606	56		248
STATEMENT SHOWING INVENTORY RECORD UNDER PERPETUAL LIFO METHOD
	RECIEPTS	COST OF GOODS SOLD	BALANCE
DATE	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $
01-Jan							50	2	100
03-Jan				34	2	68	16	2	32
14-Feb	78	3	234				16	2	32
							78	3	234
15-Feb				70	3	210	16	2	32
							8	3	24
30-Jun	100	4	400				16	2	32
							8	3	24
							100	4	400
06-Nov				92	4	368	16	2	32
							8	3	24
							8	4	32
19-Nov	24	5	120				16	2	32
							8	3	24
							8	4	32
							24	5	120
TOTAL	202		754	196		646	56		208
			FIFO	LIFO
Cost of Ending inventory	248	208
Cost of goods sold		606	646
Req c.
Gross Margin
			FIFO	LIFO
Sales revenue (196*8)	1568	1568
Less: Cost of goods sold	606	646
Gross margin		962	922