Question

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

Required information The following information applies to the questions displayed below.) Hemming Co. reported the following current-year purchases and sales for its only product. Date Activities Jan. 1 Beginning inventory Jan. 10 Sales Mar. 14 Purchase Mar. 15 Sales July 30 Purchase Oct. 5 Sales Oct. 26 Purchase Totals Units Acquired at Cost Units Sold at Retail 200 units @ $10 - $ 2,000 150 units @ $40 350 units @ $15 - 5,250 300 units @ $40 450 units @ $20 - 9,000 430 units @ $40 100 units @ $25 - 2,500 1,100 units $18,750 880 units 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 COGS and ending inventory - Periodic FIFO - Hemming Co
Particulars	Cost of goods available for sale			Cost of goods sold			Ending Inventory
	Nos of units	Unit Cost	Cost of goods available for sale	Nos of units sold	Unit Cost	Cost of goods sold	Nos of units in ending inventory	Unit Cost	Ending inventory
Beginning inventory	200	$10.00	$2,000	200	$10.00	$2,000.00	0	$10.00	$0.00
Purchases:
14-Mar	350	$15.00	$5,250	350	$15.00	$5,250.00	0	$15.00	$0.00
30-Jul	450	$20.00	$9,000	330	$20.00	$6,600.00	120	$20.00	$2,400.00
26-Oct	100	$25.00	$2,500	0	$25.00	$0.00	100	$25.00	$2,500.00
Total	1100		$18,750	880		$13,850.00	220		$4,900.00

Solution b:

Computation of COGS and ending inventory - Periodic LIFO - Hemming Co
Particulars	Cost of goods available for sale			Cost of goods sold			Ending Inventory
	Nos of units	Unit Cost	Cost of goods available for sale	Nos of units sold	Unit Cost	Cost of goods sold	Nos of units in ending inventory	Unit Cost	Ending inventory
Beginning inventory	200	$10.00	$2,000	0	$10.00	$0.00	200	$10.00	$2,000.00
Purchases:
14-Mar	350	$15.00	$5,250	330	$15.00	$4,950.00	20	$15.00	$300.00
30-Jul	450	$20.00	$9,000	450	$20.00	$9,000.00	0	$20.00	$0.00
26-Oct	100	$25.00	$2,500	100	$25.00	$2,500.00	0	$25.00	$0.00
Total	1100		$18,750	880		$16,450.00	220		$2,300.00

Solution c:

Computation of gross Margin
Particulars	FIFO	LIFO
Sales	$35,200.00	$35,200.00
Cost of goods sold	$13,850.00	$16,450.00
Gross Profit	$21,350.00	$18,750.00