Question

Required information Use the following information for the Exercises below [The following information applies to the questions displayed below. Hemming Co. reported the following current-year purchases and sales for its only product. Activities Units Acquired at Cost Date Jan. 1 Beginning inventory Jan. 10 Sales Mar.14 Purchase Mar. 15 Sales July30 Purchase Oct. 5 Sales Oct. 26 Purchase 290 units $13.60 3,944 500 units $18.609,300 490 units $23.60 11,564 190 units $28.605,434 Units Sold at Retail 260 units $43.60 430 units $43.60 470 units $43.60 Totals 1,470 units $30,242 1,160 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

Solution a:

Computation of ending inventory and cost of goods sold under Periodic FIFO
a) periodic FIFO	Goods Available for sale			Cost of goods sold			Ending Inventory
	No. of Units	Cost Per unit	Cost of Goods Available for Sale	No. of Units sold	Cost Per unit	Cost of Goods sold	Ending Inventory Units	Cost per unit	Ending Inventory Cost
Beginning Inventory	290	$13.60	$3,944.00	290	$13.60	$3,944.00	0
Purchases:
14-March	500	$18.60	$9,300.00	500	$18.60	$9,300.00	0
30-July	490	$23.60	$11,564.00	370	$23.60	$8,732.00	120	$23.60	$2,832.00
26-october	190	$28.60	$5,434.00				190	$28.60	$5,434.00
Total	1470		$30,242.00	1160		$21,976.00	310		$8,266.00

Solution b:

Computation of ending inventory and cost of goods sold under Periodic LIFO
b) periodic LIFO	Goods Available for sale			Cost of goods sold			Ending Inventory
	No. of Units	Cost Per unit	Cost of Goods Available for Sale	No. of Units sold	Cost Per unit	Cost of Goods sold	Ending Inventory Units	Cost per unit	Ending Inventory Cost
Beginning Inventory	290	$13.60	$3,944.00				290	$13.60	$3,944.00
Purchases:
14-March	500	$18.60	$9,300.00	480	$18.60	$8,928.00	20	$18.60	$372.00
30-July	490	$23.60	$11,564.00	490	$23.60	$11,564.00	0
26-october	190	$28.60	$5,434.00	190	$28.60	$5,434.00	0
Total	1470		$30,242.00	1160		$25,926.00	310		$4,316.00

Solution c:

Computation of Gross Margin
c) Gross Margin	FIFO	LIFO
Sales Revenue (1160*$43.60)	$50,576.00	$50,576.00
Less: Cost Of Goods sold	$21,976.00	$25,926.00
Gross Margin	$28,600.00	$24,650.00