Question

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

230

units

@ $11.20

=

$

2,576

Jan.

10

Sales

160

units

@ $41.20

Mar.

14

Purchase

350

units

@ $16.20

=

5,670

Mar.

15

Sales

320

units

@ $41.20

July

30

Purchase

430

units

@ $21.20

=

9,116

Oct.

5

Sales

400

units

@ $41.20

Oct.

26

Purchase

130

units

@ $26.20

=

3,406

Totals

1,140

units

$

20,768

880

units

Exercise 5-9A Periodic: Inventory costing system LO P3

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

	Answer =
	CALCULATION OF COST OF ENDING INVENTORY AND COST OF GOODS SOLD UNDER FIFO METHOD
			PURCHASES/Op. Inventory			COST OF GOODS SOLD			CLOSING BALANCE
	Date	Particulars	Units (A)	Rate Per unit	Total Cost	Units (A)	Rate Per unit	Total Cost	Units (A)	Rate Per unit	Total Cost
	Jan 01	Beginning inventory	230	$          11.20	$            2,576.00
	Mar, 14	Purchases	350	$          16.20	$            5,670.00
	July, 30	Purchases	430	$          21.20	$            9,116.00
	Oct, 26	Purchases	130	$          26.20	$            3,406.00
		Goods Available For Sale	1140		$         20,768.00
		COGS as per FIFO
		Sales				230	$             11.20	$     2,576.00
		Sales				350	$             16.20	$     5,670.00
		Sales				300	$             21.20	$     6,360.00	130	$         21.20	$   2,756.00
									130	$         26.20	$   3,406.00
						880		$14,606
					Total	880		14606	260		$   6,162.00
			COGS	Ending Inventory
		AS per the FIFO	$        14,606.00	$    6,162.00
	CALCULATION OF COST OF ENDING INVENTORY AND COST OF GOODS SOLD UNDER LIFO METHOD
			PURHASES			COST OF GOODS SOLD			CLOSING BALANCE
	Date	Particulars	Units (A)	Rate Per unit	Total Cost	Units (A)	Rate Per unit	Total Cost	Units (A)	Rate Per unit	Total Cost
	Jan 01	Beginning inventory	230	$          11.20	$            2,576.00
	Mar, 14	Purchases	350	$          16.20	$            5,670.00
	July, 30	Purchases	430	$          21.20	$            9,116.00
	Oct, 26	Purchases	130	$          26.20	$            3,406.00
		Goods Available For Sale	1140		$         20,768.00
		COGS as per FIFO
		Sales				320	$             16.20	$     5,184.00
		Sales				430	$             21.20	$     9,116.00
		Sales				130	$             26.20	$     3,406.00
						880		$17,706	230	$         11.20	$   2,576.00
									30	$         16.20	$      486.00
					Total	880		17706	260		$   3,062.00
			COGS	Ending Inventory
		AS per the FIFO	$        17,706.00	$    3,062.00
		Particulara	FIFO	LIFO
	Jan, 10	Sales (160*41.20)	$          6,592.00	$    6,592.00
		Sales (320*41.20)	$        13,184.00	$ 13,184.00
		Sales (400*41.20)	$        16,480.00	$ 16,480.00
		Total Revenue	$        36,256.00	$ 36,256.00
		Less: Cost of Goods Sold	$        14,606.00	$ 17,706.00
		Gross Margin	$        21,650.00	$ 18,550.00