Question

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. Units Sold at Retail Units Acquired at Cost 200 units @ $10 = $ 2,000 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 350 units 450 units @ $15 @ $20 = = 5,250 9,000 150 units 300 units 430 units @ $40 @ $40 @ $40 @ $25 = 100 units 1,100 units 2,500 $18,750 880 units 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. Using FIFO Method

Cost of Ending Inventory
Particulars	Amount ($)
Beginning Inventory (units)	200
Purchase (units)	900
Sales (units)	880
Closing Inventory (units)	220
Value using FIFO Method
For 100 units @ 25 p.u.	2500
For balance 120 units @20 p.u.	2400
	4900

Cost of Goods sold
Sold Units	From	Sold Units	Rate	Amount($)
200	Beginning Inventory	200	10	2000
350	Purchases on March 14	350	15	5250
330	Purchases on March 14	350	20	7000
				14250

2. Using LIFO Method

Cost of Ending Inventory
Particulars	Amount ($)
Beginning Inventory (units)	200
Purchase (units)	900
Sales (units)	880
Closing Inventory (units)	220
Value using LIFO Method
For 200 units @ 10 p.u.	2000
For next 20 units @ 15 p.u	300
	2300

Cost of Goods sold
Sold Units		Rate	Amount($)
First 100	100	25	2500
Next 450	450	20	9000
Next 330	330	15	4950
			16450

3. Gross Margin

Computation of Margin
Method	Turnover	Cost of Goods sold	Margin
FIFO	35200	14250	20950
LIFO	35200	16450	18750