Question

In: Accounting

Required information [The following information applies to the questions displayed below.]    Hemming Co. reported the...

Required information

[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 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.

Solutions

Expert Solution

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)

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