Question

Exercise 5-7 Perpetual: Inventory costing methods-FIFO and LIFO LO P1 

Required: Hemming uses a perpetual inventory system.

 1. Determine the costs assigned to ending inventory and to cost of goods sold using FIFO.

 2. Determine the costs assigned to ending inventory and to cost of goods sold using LIFO.

 3. Compute the gross margin for FIFO method and LIFO method.

 

Answer 1

1.

	FIFO	Cost of goods available for sale			Cost of Goods Sold			Ending Balance
Date	Activity	Units	Unit Price	Amount	Units	Unit Price	Amount	Units	Unit Price	Amount
Jan-01	Beginning Inventory	250	$          12.00	$     3,000.00				200	$   12.00	$ 2,400.00
Jan-10	Sales				200	$          12.00	$      2,400.00	50	$   12.00	$    600.00
Mar-14	Purchase	400	$          17.00	$     6,800.00				50	$   12.00	$    600.00
								400	$   17.00	$ 6,800.00
Mar-15	Sales				50	$          12.00	$          600.00
					310	$          17.00	$      5,270.00	90	$   17.00	$ 1,530.00
Jul-30	Purchase	450	$          22.00	$     9,900.00				90	$   17.00	$ 1,530.00
								450	$   22.00	$ 9,900.00
Oct-05	Sales				90	$          17.00	$      1,530.00
					330	$          22.00	$      7,260.00	120	$   22.00	$ 2,640.00
Oct-26	Purchase	150	$          27.00	$     4,050.00				120	$   22.00	$ 2,640.00
								150	$   27.00	$ 4,050.00
	Total	1250		$ 23,750.00	980		$    17,060.00	270		$ 6,690.00

2.

	LIFO	Cost of goods available for sale			Cost of Goods Sold			Ending Balance
Date	Activity	Units	Unit Price	Amount	Units	Unit Price	Amount	Units	Unit Price	Amount
Jan-01	Beginning Inventory	250	$          12.00	$     3,000.00				200	$   12.00	$ 2,400.00
Jan-10	Sales				200	$          12.00	$      2,400.00	50	$   12.00	$    600.00
Mar-14	Purchase	400	$          17.00	$     6,800.00				50	$   12.00	$    600.00
								400	$   17.00	$ 6,800.00
Mar-15	Sales				360	$          17.00	$      6,120.00	50	$   12.00	$    600.00
								40	$   17.00	$    680.00
Jul-30	Purchase	450	$          22.00	$     9,900.00				50	$   12.00	$    600.00
								40	$   17.00	$    680.00
								450	$   22.00	$ 9,900.00
Oct-05	Sales				420	$          22.00	$      9,240.00	50	$   12.00	$    600.00
								40	$   17.00	$    680.00
								30	$   22.00	$    660.00
Oct-26	Purchase	150	$          27.00	$     4,050.00				50	$   12.00	$    600.00
								40	$   17.00	$    680.00
								30	$   22.00	$    660.00
								150	$   27.00	$ 4,050.00
	Total	1250		$ 23,750.00	980		$    17,760.00	270		$ 5,990.00

	FIFO	LIFO
Sales Revenue	$      41,160.00	$   41,160.00
Cost of Goods Sold	$      17,060.00	$   17,760.00
Gross Profit	$      58,220.00	$   58,920.00