Question

Required information Exercise 5-19 Effect of inventory cost flow (FIFO, LIFO, and weighted average) on gross margin LO 5-6 (The following information applies to the questions displayed below.] The following information pertains to Mason Company for 2018: Beginning inventory Units purchased 140 units 290 units @ @ $40 $45 Ending inventory consisted of 60 units. Mason sold 370 units at $90 each. All purchases and sales were made with cash. Operating expenses amounted to $4100. Exercise 5-19 Part a Required a. Compute the gross margin for Mason Company using the following cost flow assumptions: (1) FIFO, (2) LIFO, and (3) weighted average. (Round "Cost per unit" to 2 decimal places and final answers to nearest whole dollar amount.) LIFO Weighted LIFO Average FIFO $ 17,350 Gross margin $ 17,050 $ 24,738

Answer 1

		FIFO			LIFO			WEIGHTAGE AVERAGE
		QTY	RATE	AMOUNT	QTY	RATE	AMOUNT	QTY	RATE	AMOUNT
	OPENING INVENTORY	140	40	5600	140	40	5600	140	40	5600
	PURCHASE	290	45	13050	290	45	13050	290	45	13050
		430		18650	430		18650	430	43.37	18650
	CLOSING STOCK	60	45	2700	60	40	2400	60	43.37	2602.2
	COST OF GOODS SOLD	370		15950	370		16250	370		16047.8
	CLOSING STOCK VALUATION
	FIFO -	LAST INVENTORY HELD AS STOCK WILL BE VALUED ON THE PURCHASE OF LAST TRANSACTION @ $45
	LIFO -	LAST INVENTORY HELD AS STOCK WILL BE VALUED ON THE PURCHASE ON FIRST PURCHASE TRANSACTION @$40/-
	WEIGHTAGE AVERAGE -	CALCULATE ON THE AVERAGE RATE
		TOTAL COST = OPENING + PURCHASE
		TOTAL UNIT = OPENING + PURCHASE
	=	5600+13050
		140+290
	=	43.37
	CALCULATION OF GROSS MARGIN
A		FIFO			LIFO			WEIGHTAGE AVERAGE
		QTY	RATE	AMOUNT	QTY	RATE	AMOUNT	QTY	RATE	AMOUNT
	SALES	370	90	33300	370	90	33300	370	90	33300
	COST OF GOODS SOLD			15950			16250			16047.8
	MARGIN			17350			17050			17252.2
	CALCULATION OF NET MARGIN
B		FIFO			LIFO			WEIGHTAGE AVERAGE
		QTY	RATE	AMOUNT	QTY	RATE	AMOUNT	QTY	RATE	AMOUNT
	SALES	370	90	33300	370	90	33300	370	90	33300
	COST OF GOODS SOLD			15950			16250			16047.8
	OPERATING EXPENSES			4100			4100			4100
	MARGIN			13250			12950			13152.2
C	CASH FLOW FROM OPERATING ACTIVITY
		FIFO	LIFO	WEIGHTAGE AVERAGE
	CASH INFLOW FROM CUSTOMERS	33300	33300	33300
	CASH OUTFLOW FOR INVENTORY	13050	13050	13050
	CASH OUTFLOW FOR EXPENSES	4100	4100	4100
	NET CASH FLOW FROM OPERATING ACTIVITY	16150	16150	16150
	NOTE :
	CASH FLOW FOR INENTORY TAKEN THE ACTUAL AMOUNT PAID FOR PURCHASE OF INVENORY IN ALL CASES
	IN CASH FLOW ONLY ACTUAL CASH FLOW WILL BE TAKEN
	SO INVENTORY VALUATION ON DIFFERENT METHOD,CAN'T EFFECT CASH FLOW