Question

In: Accounting

Required information Use the following information for the Exercises below. [The following information applies to the...

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 270 units @ $12.80 = $ 3,456
Jan. 10 Sales 220 units @ $42.80
Mar. 14 Purchase 400 units @ $17.80 = 7,120
Mar. 15 Sales 340 units @ $42.80
July 30 Purchase 470 units @ $22.80 = 10,716
Oct. 5 Sales 440 units @ $42.80
Oct. 26 Purchase 170 units @ $27.80 = 4,726
Totals 1,310 units $ 26,018 1,000 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.

Perpetual FIFO:
Goods Purchased Cost of Goods Sold Inventory Balance
Date # of units Cost per unit # of units sold Cost per unit Cost of Goods Sold # of units Cost per unit Inventory Balance
January 1 270 @ $12.80 = $3,456.00
January 10 220 @ $12.80 = $2,816.00 50 @ $12.80 = $640.00
March 14 400 @ $17.80 50 @ $12.80 = $640.00
400 @ $17.80 = 7,120.00
$7,760.00
March 15 @ $12.80 = $0.00 @
@ $17.80 = 0.00 @
July 30
October 5
October 26
Totals $2,816.00

Solutions

Expert Solution

1.

2.

3.

Computation of Gross Margin
c) Gross Margin FIFO LIFO
Sales Revenue (1000*$42.80) $42,800.00 $42,800.00
Less: Cost Of Goods sold $18,100.00 $18,900.00
Gross Margin $24,700.00 $23,900.00

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