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

220

units

@ $10.80

=

$

2,376

Jan.

10

Sales

190

units

@ $40.80

Mar.

14

Purchase

330

units

@ $15.80

=

5,214

Mar.

15

Sales

280

units

@ $40.80

July

30

Purchase

420

units

@ $20.80

=

8,736

Oct.

5

Sales

390

units

@ $40.80

Oct.

26

Purchase

120

units

@ $25.80

=

3,096

Totals

1,090

units

$

19,422

860

units

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 1 220 @ $10.80 = $2,376.00 January 10 March 14 March 15 July 30 October 5 October 26 Totals

·                Required 1

·               

	FIFO: LIFO: Sales revenue Less: Cost of goods sold Gross margin

·      

Answer 1

Part (1)	Perpetual FIFO
		Goods purchased		Cost of goods sold			Inventory balance
	Date	# of units	Cost per unit	# of units	Cost per unit	Cost of goods sold	# of units	Cost per unit	Inventory balance
	Jan 1						220	10.8	2,376
	Jan 10			190.00	10.8	2,052	30	10.8	324
	Mar 14	330	15.8				30	10.8	324
							330	15.8	5,214
	Mar 15			30	10.8	324
				250	15.8	3,950	80	15.8	1,264
	July 30	420	20.8				80	15.8	1,479
							420	20.8	8,736
	Oct 5			80	15.8	1,264
				310	20.8	6,448	110	20.8	2,288
	Oct 26	120	25.8				110	20.8	2,288
							120	25.8	3,096
		870		860		14,038	230		5,384
Part (2)	Perpetual LIFO
		Goods purchased		Cost of goods sold			Inventory balance
	Date	# of units	Cost per unit	# of units	Cost per unit	Cost of goods sold	# of units	Cost per unit	Inventory balance
	Jan 1						220	10.8	2,376
	Jan 10			120	25.8	3,096	220	10.8	2,376
				70	20.8	1,456
	Mar 14	330	15.8				220	10.8	2,376
							330	15.8	5,214
	Mar 15			280	20.8	5,824	220	10.8	2,376
							330	15.8	5,214
	July 30	420	20.8				220	10.8	2,376
							330	15.8	5,214
							70	20.8	1,456
	Oct 5			70	20.8	1,456	220	10.8	2,376
				320	15.8	5,056	10	15.8	158
	Oct 26	120	25.8				220	10.8	2,376
							10	15.8	158
		870		860		16,888	230		2,534
Part (3)				FIFO	LIFO
	Sales			35,088	35,088
	Less : Cost of goods sold			14,038	16,888
	Gross margin			21,050	18,200
	Sales = (190*40.8)+(280*40.8)+(390*40.8) = 35,088