Question

Required information

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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

260

units

@ $12.40

=

$

3,224

Jan.

10

Sales

215

units

@ $42.40

Mar.

14

Purchase

420

units

@ $17.40

=

7,308

Mar.

15

Sales

380

units

@ $42.40

July

30

Purchase

460

units

@ $22.40

=

10,304

Oct.

5

Sales

425

units

@ $42.40

Oct.

26

Purchase

160

units

@ $27.40

=

4,384

Totals

1,300

units

$

25,220

1,020

units

Required:
Hemming 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.

Required:
Hemming 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

		Using Periodic Inventory system
		a) FIFO Method
		Date	Total Available	Cost of Goods sold	Amount($)	Ending Inventory	Amount($)
		Jan-01	260 units @ $12.40	260 units @ $12.40	3224	0 units @ $12.40	0
		Mar-14	420 units @ $17.40	420 units @ $17.40	7308	0 units @ $17.40	0
		Jul-30	460 units @ $22.40	340 units @ $22.40	7616	120 units @ $22.40	2688
		Oct-26	160 units @ $27.40	0 units @ $27.40	0	160 units @ $27.40	4384
				1020 units	18148	280 units	7072
		b) LIFO Method
		Date	Total Available	Cost of Goods sold	Amount($)	Ending Inventory	Amount($)
		Jan-01	260 units @ $12.40	0 units @ $12.40	0	260 units @ $12.40	3224
		Mar-14	420 units @ $17.40	400 units @ $17.40	6960	20 units @ $17.40	348
		Jul-30	460 units @ $22.40	460 units @ $22.40	10304	0 units @ $22.40	0
		Oct-26	160 units @ $27.40	160 units @ $27.40	4384	0 units @ $27.40	0
				1020 units	21648	280 units	3572
			Requirement
			Particulars	Ending Inventory	Cost of goods sold
			a) FIFO	$7072	$18148
			b) LIFO	$3572	$21648
			(C)Computation of Gross Margin
			a) FIFO Method	Amount($)
			Sales	43248
			(1020 units @ $42.40)
			Cost of goods sold	18148
			Gross Margin	25100
			(Sales-Cost of goods sold)
			b) LIFO Method	Amount($)
			Sales	43248
			(1020 units @ $42.40)
			Cost of goods sold	21648
			Gross Margin	21600
			(Sales-Cost of goods sold)