Question

The Shirt Shop had the following transactions for T-shirts for 2018, its first year of operations:

Jan. 20 Purchased 420 units @ $ 9 = $ 3,780

Apr. 21 Purchased 150 units @ $ 10 = 1,500

July 25 Purchased 230 units @ $ 12 = 2,760

Sept. 19 Purchased 80 units @ $ 13 = 1,040

During the year, The Shirt Shop sold 730 T-shirts for $18 each.

Compute the difference in gross margin between the FIFO and LIFO cost flow assumptions.

Answer 1

difference in gross margin = difference in cost of goods sold = 7730 - 7200	530.00
FIFO
Date	Particulars	Units	Cost	Amount	COGS
20-Jan	Purchase	420.00	9.00	3,780.00
21-Apr	Purchase	150.00	10.00	1,500.00
25-Jul	Purchase	230.00	12.00	2,760.00
19-Sep	Purchase	80.00	13.00	1,040.00
	Total	880.00		9,080.00
	COGS	730.00		7,200.00	420*9 + 150*10 +160*12
	Ending Inventory	150.00		1,880.00	70*12 + 80*13
COGS	7,200.00
Ending Inventory	1,880.00
LIFO
Date	Particulars	Units	Cost	Amount	COGS
20-Jan	Purchase	420.00	9.00	3,780.00
21-Apr	Purchase	150.00	10.00	1,500.00
25-Jul	Purchase	230.00	12.00	2,760.00
19-Sep	Purchase	80.00	13.00	1,040.00
	Total	880.00		9,080.00
	COGS	730.00		7,730.00	80*13 + 230*12+ 150*10 +270*9
	Ending Inventory	150.00		1,350.00	150*9
COGS	7,730.00
Ending Inventory	1,350.00