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

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

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.

Determine the costs assigned to ending inventory and to cost of goods sold using FIFO.

	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 1 230 @ $11.20 = $2,576.00 January 10 March 14 March 15 July 30 October 5 October 26 Totals $0.00

Answer 1

Solution 1:

Computation of ending inventory COGS under FIFO - Hemming Co
Date	Beginning Inventory			Purchase			Cost of Goods Sold			Ending Inventory
	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount
1-Jan	230	$11.20	$2,576.00	0	$0.00	$0.00	0	$0.00	$0.00	230	$11.20	$2,576.00
10-Jan	230	$11.20	$2,576.00	0	$0.00	$0.00	160	$11.20	$1,792.00	70	$11.20	$784.00
14-Mar	70	$11.20	$784.00	350	$16.20	$5,670.00	0	$0.00	$0.00	70	$11.20	$784.00
										350	$16.20	$5,670.00
15-Mar	70	$11.20	$784.00	0	$0.00	$0.00	70	$11.20	$784.00	100	$16.20	$1,620.00
	350	$16.20	$5,670.00				250	$16.20	$4,050.00
30-Jul	100	$16.20	$1,620.00	430	$21.20	$9,116.00	0	$0.00	$0.00	100	$16.20	$1,620.00
										430	$21.20	$9,116.00
5-Oct	100	$16.20	$1,620.00	0	$0.00	$0.00	100	$16.20	$1,620.00	130	$21.20	$2,756.00
	430	$21.20	$9,116.00				300	$21.20	$6,360.00
26-Oct	130	$21.20	$2,756.00	130	$26.20	$3,406.00	0	$0.00	$0.00	130	$21.20	$2,756.00
										130	$26.20	$3,406.00
Total							880		$14,606.00	260		$6,162.00

Solution 2:

Computation of ending inventory COGS under LIFO - Hemming Co
Date	Beginning Inventory			Purchase			Cost of Goods Sold			Ending Inventory
	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount
1-Jan	230	$11.20	$2,576.00	0	$0.00	$0.00	0	$0.00	$0.00	230	$11.20	$2,576.00
10-Jan	230	$11.20	$2,576.00	0	$0.00	$0.00	160	$11.20	$1,792.00	70	$11.20	$784.00
14-Mar	70	$11.20	$784.00	350	$16.20	$5,670.00	0	$0.00	$0.00	70	$11.20	$784.00
										350	$16.20	$5,670.00
15-Mar	70	$11.20	$784.00	0	$0.00	$0.00	320	$16.20	$5,184.00	70	$11.20	$784.00
	350	$16.20	$5,670.00							30	$16.20	$486.00
30-Jul	70	$11.20	$784.00	430	$21.20	$9,116.00	0	$0.00	$0.00	70	$11.20	$784.00
	30	$16.20	$486.00							30	$16.20	$486.00
										430	$21.20	$9,116.00
5-Oct	70	$11.20	$784.00	0	$0.00	$0.00	400	$21.20	$8,480.00	70	$11.20	$784.00
	30	$16.20	$486.00							30	$16.20	$486.00
	430	$21.20	$9,116.00							30	$21.20	$636.00
26-Oct	70	$11.20	$784.00	130	$26.20	$3,406.00	0	$0.00	$0.00	70	$11.20	$784.00
	30	$16.20	$486.00							30	$16.20	$486.00
	30	$21.20	$636.00							30	$21.20	$636.00
										130	$26.20	$3,406.00
Total							880		$15,456.00	260		$5,312.00

Solution 3:

Computation of Gross Profit
Particulars	FIFO	LIFO
Sales	$36,256.00	$36,256.00
Cost of goods sold	$14,606.00	$15,456.00
Gross Profit (Sales - COGS)	$21,650.00	$20,800.00