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The Shirt Shop had the following transactions for T-shirts for2018, its first year of...

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Accounting

The Shirt Shop had the following transactions for T-shirts for2018, its first year of operations:

Jan. 20 Purchased 420 units @ $ 9 = $ 3,780

Apr. 21 Purchased 150 units @ $ 10 = 1,500

July 25 Purchased 230 units @ $ 12 = 2,760

Sept. 19 Purchased 80 units @ $ 13 = 1,040

During the year, The Shirt Shop sold 730 T-shirts for $18 each.Compute the difference in GROSS MARGIN between the FIFO and LIFOcost flow assumptions

Answer & Explanation Solved by verified expert
3.7 Ratings (651 Votes)

Sales revenue = 730 T shirts X $18
$ 13,140
As per FIFO Cost of Goods sold
Jan-20 Purchased 420 $             9 $       3,780 420 $             9 $    3,780
Apr-21 Purchased 150 $           10 $       1,500 150 $          10 $    1,500
Jul-25 Purchased 230 $           12 $       2,760 160 $          12 $    1,920
Sep-16 Purchased 80 $           13 $       1,040 0 $          13 $           -  
Total $       9,080 730 $    7,200
Gross Margin = Sales revenue - cost of goods sold
= $13,140 - $7,200
= $    5,940
As per LIFO Cost of Goods sold
Jan-20 Purchased 420 $             9 $       3,780 270 $             9 $    2,430
Apr-21 Purchased 150 $           10 $       1,500 150 $          10 $    1,500
Jul-25 Purchased 230 $           12 $       2,760 230 $          12 $    2,760
Sep-16 Purchased 80 $           13 $       1,040 80 $          13 $    1,040
Total $       9,080 730 $    7,730
Gross Margin = Sales revenue - cost of goods sold
= $13,140 - $7,730
= $    5,410
Difference in Gross margin = Gross margin as per FIFO - Gross margin as per LIFO
= $5,940 - $5,410
= $ 530

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Transcribed Image Text

In: AccountingThe Shirt Shop had the following transactions for T-shirts for2018, its first year of operations:...The Shirt Shop had the following transactions for T-shirts for2018, its first year of operations:Jan. 20 Purchased 420 units @ $ 9 = $ 3,780Apr. 21 Purchased 150 units @ $ 10 = 1,500July 25 Purchased 230 units @ $ 12 = 2,760Sept. 19 Purchased 80 units @ $ 13 = 1,040During the year, The Shirt Shop sold 730 T-shirts for $18 each.Compute the difference in GROSS MARGIN between the FIFO and LIFOcost flow assumptions

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