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Below are purchases and sales for Hector retail company for the year 2020. January 1    purchased    10   UNITS at $20 each January 2  purchased       20  UNITS at $25...

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Accounting

Below are purchases and sales for Hector retail company for theyear 2020.

January1    purchased    10   UNITSat $20 each

January2  purchased       20  UNITSat $25 each

January  3  purchased        20UNITS at $ 30 each

January  4   Sold                    25UNITS at $ 50 each

(A)

USING FIRST IN FIRST OUT METHOD (FIFO) DETERMINE THEFOLLOWING:

A,.COST OF GOOS SOLD

B. COST OF ENDING INVENTORY

C. GROSS PROFIT

(B)

USING LAST IN FIRST OUT METHOD (LIFO)

  1. COST OF ENDING INVENTORY
  2. COST OF GOODS SOLD
  3. GROSS PROFIT

Answer & Explanation Solved by verified expert
3.8 Ratings (702 Votes)

Answer :

1) computation of Ending inventory ,COGS and Gross profit under FIFO method :

Purchases COGS Ending
Date qty rate Amount qty Rate Amount Qty rate Amount
1 jan 10 20 200 10 20 200
2 jan 20 25 500 10 20 200
20 25 500
3 jan 20 30 600 10 20 200
20 25 500
20 30 600
4 jan 10 20 200
15 25 375 5 25 125
20 30 600
25 575 25 725

Therefore, under FIFO

A) cost of goods sold = 575

B) Ending inventory = 725

C) Gross profit = (25 × 30) - 575 = 1250 - 575 = 675

2) computation of Ending inventory ,COGS and Gross profit under LIFO method :

Purchases COGS Ending
Date qty rate Amount qty Rate Amount Qty rate Amount
1 jan 10 20 200 10 20 200
2 jan 20 25 500 10 20 200
20 25 500
3 jan 20 30 600 10 20 200
20 25 500
20 30 600
4 jan 20 30 600
5 25 125 15 25 375
10 20 200
25 725 25 575

Therefore, under LIFO

A) cost of goods sold = 725

B) Ending inventory = 575

C) Gross profit = (25 × 30) - 725 = 1250 - 725 = 525
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