Hemming Co. reported the following current-year purchases and sales for its only product. Date Activities Units Acquired at Cost Units...

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Accounting

Hemming Co. reported the following current-year purchases and salesfor its only product.

Date Activities Units Acquired at Cost Units Sold at Retail
Jan. 1 Beginning inventory 300 units @ $14.00 = $ 4,200
Jan. 10 Sales 250 units @ $44.00
Mar. 14 Purchase 520 units @ $19.00 = 9,880
Mar. 15 Sales 460 units @ $44.00
July 30 Purchase 500 units @ $24.00 = 12,000
Oct. 5 Sales 480 units @ $44.00
Oct. 26 Purchase 200 units @ $29.00 = 5,800
Totals 1,520 units $ 31,880 1,190 units
Exercise 5-7 Perpetual: Inventory costing methods-FIFO and LIFOLO P1
Required:
Hemming uses a perpetual inventory system.

1. Determine the costs assigned to endinginventory and to cost of goods sold using FIFO.
2. Determine the costs assigned to endinginventory and to cost of goods sold using LIFO.
3. Compute the gross margin for FIFO method andLIFO method.

Answer & Explanation Solved by verified expert

3.8 Ratings (536 Votes)

Ans. 1	FIFO:
	Purchase				Cost of goods sold			Balance
	Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	1-Jan							300	$14.00	$4,200.00

	10-Jan				250	$14.00	$3,500.00	50	$14.00	$700.00

	14-Mar	520	$19.00	$9,880.00				50	$14.00	$700.00
								520	$19.00	$9,880.00

	15-Mar				50	$14.00	$700.00
					410	$19.00	$7,790.00	110	$19.00	$2,090.00

	30-Jul	500	$24.00	$12,000.00				110	$19.00	$2,090.00
								500	$24.00	$12,000.00

	5-Oct				110	$19.00	$2,090.00
					370	$24.00	$8,880.00	130	$24.00	$3,120.00

	26-Oct	200	$29.00	$5,800.00				130	$24.00	$3,120.00
								200	$29.00	$5,800.00
	Total				Cost of goods sold		$22,960	Cost of Ending inventory		$8,920

	*In FIFO method the units that have purchased first, are released the first one.


Ans. 2	LIFO:
	Purchase				Cost of goods sold			Balance
	Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	1-Jan							300	$14.00	$4,200.00

	10-Jan				250	$14.00	$3,500.00	50	$14.00	$700.00

	14-Mar	520	$19.00	$9,880.00				50	$14.00	$700.00
								520	$19.00	$9,880.00

	15-Mar				460	$19.00	$8,740.00	50	$14.00	$700.00
								60	$19.00	$1,140.00

	30-Jul	500	$24.00	$12,000.00				50	$14.00	$700.00
								60	$19.00	$1,140.00
								500	$24.00	$12,000.00

	5-Oct				480	$24.00	$11,520.00	50	$14.00	$700.00
								60	$19.00	$1,140.00
								20	$24.00	$480.00

	26-Oct	200	$29.00	$5,800.00				50	$14.00	$700.00
								60	$19.00	$1,140.00
								20	$24.00	$480.00
								200	$29.00	$5,800.00
	Total				Cost of goods sold		$23,760	Cost of Ending inventory		$8,120

	*In LIFO method the units that have purchased last, are released the first one.

Ans. 3			FIFO	LIFO
	Sales		$52,360	$52,360
	Less: Cost of goods sold		-$22,960	-$23,760
	Gross margin		$29,400	$28,600

	Calculations for sales:

	Date	Units	Rate	Total
	10-Jan	250	$44	$11,000
	15-Mar	460	$44	$20,240
	5-Oct	480	$44	$21,120
	Total sales			$52,360

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