Question

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

Date

Activities

Units Acquired at Cost

Units Sold at Retail

Jan.

1

Beginning inventory

260

units

@ $12.40

=

$

3,224

Jan.

10

Sales

215

units

@ $42.40

Mar.

14

Purchase

420

units

@ $17.40

=

7,308

Mar.

15

Sales

380

units

@ $42.40

July

30

Purchase

460

units

@ $22.40

=

10,304

Oct.

5

Sales

425

units

@ $42.40

Oct.

26

Purchase

160

units

@ $27.40

=

4,384

Totals

1,300

units

$

25,220

1,020

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.Required:
Hemming uses a perpetual inventory system. Assume that ending inventory is made up of 45 units from the March 14 purchase, 75 units from the July 30 purchase, and all 160 units from the October 26 purchase. Using the specific identification method, calculate the following.

Answer 1

Perpetual System FIFO Method Cost of goods sold Purchases Date Inventory Quantity unit cost total cost 260 $12.40 unit cost Total cost Quantity Quantity unit cost Total cost Jan-01 3,224.00 215 $12.40 45 $12.40 $ Jan-10 2,666.00 558.00 420 17.40 7,308.00 45 $12.40 Mar-14 558.00 420 $17.40 7,308.00 45 $12.40 $ 85 $17.40 $1,479.00 Mar-15 558.00 335 $17.40 5,829.00 85 $17.40 $ 1,479.00 460 $22.40 $10,304.00 460 22.40 $10,304.00 Jul-30 85 $17.40 $ 1,479.00 120 $22.40 $2,688.00 Oct-05 340 $22.40 7,616.00 160 27.40 4,384.00 120 $22.40 $2,688.00 $ 4,384.00 Oct-26 160 $27.40 $18,148.00 $7,072.00 1020 280

Perpetual System LIFO Method Cost of goods sold Purchases Date Inventory Quantity unit cost total cost 260 $12.40 unit cost Total cost Quantity Quantity unit cost Total cost Jan-01 3,224.00 215 $12.40 45 $12.40 $ Jan-10 2,666.00 558.00 420 17.40 7,308.00 45 $12.40 Mar-14 558.00 420 $17.40 7,308.00 380 $17.40 45 $12.40 $ Mar-15 6,612.00 558.00 40 $17.40 $ 696.00 460 22.40 $10,304.00 45 $12.40 $ Jul-30 558.00 40 $17.40 696.00 460 $22.40 $10,304.00 425 $22.40 9,520.00 45 $12.40 $ 558.00 Oct-05 40$17.40 $ 696.00 35 $22.40 $ 784.00 160 27.40 4,384.00 45 $12.40 $ 558.00 Oct-26 40$17.40 696.00 35 $22.40 $ 784.00 160 $27.40 $4,384.00 $18,798.00 1020 280 6,422.00

Gross Margin FIFO LIFO 43,248.00 $ 43,248.00 (18,148.00) $ (18,798.00) $25,100.00 $24,450.00 Sales Less Cost of Goods sold Gross Margin Perpetual System Under Specific identification Method Cost of Goods sold Ending Inventory Date NO of Units Unit cost NO of Units Per Unit Total NO of Units Per Unit Total Activity 01-Jan Beginning 0 $12.40 $ 45 $17.40 $ 75 $22.40 $ 1,680.00 160 $27.40 260 12.40 420 17.40 460 $ 22.40 260 $12.40 $ 3,224.00 375 $17.40 $ 385 $22.40 8,624.00 O $27.40 $ 14-Mar Purchases 6,525.00 783.00 30-Jul Purchases 160 27.40 $4,384.00 26-Oct Purchases $18,373.00 $6,847.00 1300 1020 280