Question

You are the vice president of finance of Crane Corporation, a retail company that prepared two different schedules of gross margin for the first quarter ended March 31, 2020. These schedules appear below.

		Sales ($5 per unit)		Cost of Goods Sold		Gross Margin
Schedule 1		$159,900		$135,482		$24,418
Schedule 2		159,900		140,046		19,854

The computation of cost of goods sold in each schedule is based on the following data.

		Units		Cost per Unit		Total Cost
Beginning inventory, January 1		10,050		$4.10		$41,205
Purchase, January 10		8,050		4.20		33,810
Purchase, January 30		6,050		4.30		26,015
Purchase, February 11		9,050		4.40		39,820
Purchase, March 17		11,050		4.50		49,725

Mary Smith, the president of the corporation, cannot understand how two different gross margins can be computed from the same set of data. As the vice president of finance, you have explained to Ms. Smith that the two schedules are based on different assumptions concerning the flow of inventory costs, i.e., FIFO and LIFO. Schedules 1 and 2 were not necessarily prepared in this sequence of cost flow assumptions.

Prepare two separate schedules computing cost of goods sold and supporting schedules showing the composition of the ending inventory under both cost flow assumptions.

Crane Corporation Schedules of Cost of Goods Sold For the First Quarter Ended March 31, 2020
		Schedule 1 First-in, First-out		Schedule 2 Last-in, First-out
Beginning InventoryEnding InventoryPurchasesCost of Goods Available for SaleCost of Goods Sold		$		$
AddLess : Cost of Goods Available for SaleBeginning InventoryPurchasesCost of Goods SoldEnding Inventory
Ending InventoryPurchasesCost of Goods SoldBeginning InventoryCost of Goods Available for Sale
AddLess : Cost of Goods Available for SaleEnding InventoryPurchasesCost of Goods SoldBeginning Inventory
Cost of Goods Available for SalePurchasesEnding InventoryBeginning InventoryCost of Goods Sold		$		$

Schedules Computing Ending Inventory

First-in, First-out (Schedule 1)
	at	$	=	$
	at	$	=
				$

Last-in, First-out (Schedule 2)
	at	$	=	$
	at	$	=
				$

Answer 1

For Crane Corporation

Statement showing schedules of Cost of Goods sold for the first quarter ended March,31 2020

SCHEDULE -1 Under FIFO Costing Method

		UTILISATION OF UNITS	TOTAL COST	Closing Inventory
	PARTICULARS	Beginning inventory	Jan 10 purchases	Jan 30 purchases	Feb 11 purchases	March 17 purchases
	Total Units Available 44250 units	10050	8050	6050	9050	11050
A	Total Units required 31980 (WN-1)	10050	8050	6050	7830 (bal fig)	0		12270 units (1220+11050)
B	Rate per unit ($)	4.10	4.20	4.30	4.40	4.50
C	Amount (A*B) ($)	41205	33810	26015	34452	0	135482

SCHEDULE -2 Under LIFO Costing Method

		UTILISATION OF UNITS	TOTAL COST	Closing Inventory
	PARTICULARS	Beginning inventory	Jan 10 purchases	Jan 30 purchases	Feb 11 purchases	March 17 purchases
	Total Units Available 44250 units	10050	8050	6050	9050	11050
A	Total Units required 31980	0	5830 (bal fig)	6050	9050	11050		12270 (10050+2220)
B	Rate per unit ($)	4.10	4.20	4.30	4.40	4.50
C	Amount (A*B) ($)	0	24486	26015	39820	49725	140046

Closing Inventory Schedules

Under FIFO

Particulars	Feb 11 purchases	March 17 purchases	Total
Closing inventory total units 12270	1220 (9050-7830)	11050
Rate per unit ($)	4.40	4.50
Amount (Units * rate) ($)	5368	49725	55093

Under LIFO

Particulars	Beginning Inventory as on Jan1	Jan 10 purchases	Total
Closing inventory total units 12270	10050	2220 (8050-5830)
Rate per unit ($)	4.10	4.20
Amount (Units * rate) ($)	41205	9324	50529

Working Notes- 1

	Particulars	Schedule 1 FIFO	Schedule 2 LIFO
A	Sales (given)	159900	159900
B	Selling price per unit ($)	5	5
C	Units scheduled to be sold (A/B)/Units required for production (assumption)	31980 units	31980 units

Assumed that the ratio of material to units sold is 1:1