Question

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

 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

Perpetual FIFO:

Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
1-Jan							285	13.4	3819
10-Jan				250	13.4	3350	35	13.4	469
14-Mar	470	18.4	8648				35	13.4	469
							470	18.4	8648
15-Mar				35	13.4	469
				365	18.4	6716	105	18.4	1932
30-Jul	485	23.4	11349				105	18.4	1932
							485	23.4	11349
5-Oct				105	18.4	1932
				355	$23.4	8307	130	23.4	3042
26-Oct	185	28.4	5254				130	23.4	3042
							185	28.4	5254
Total					COGS	$20774	Ending	inventory	$8296

.

Perpetual LIFO:

Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
1-Jan							285	13.4	3819
10-Jan				250	13.4	3350	35	13.4	469
14-Mar	470	18.4	8648				35	13.4	469
							470	18.4	8648
15-Mar				400	18.4	7360	35	13.4	469
							70	18.4	1288
30-Jul	485	23.4	11349				35	13.4	469
							70	18.4	1288
							485	23.4	11349
5-Oct				460	23.4	10764	35	13.4	469
							70	18.4	1288
							25	23.4	585
26-Oct	185	28.4	5254				35	13.4	469
							70	18.4	1288
							25	23.4	585
							185	28.4	5254
Total					COGS	21474	Ending	inventory	$7596

Ans. 3		FIFO	LIFO
	Sales	48174	48174
	Less: Cost of goods sold	20774	21474
	Gross margin	27400	26700

*Calculation of sales:
Date	Units	Rate	Cost
10-Jan	250	43.4	10850
15-Mar	400	43.4	17360
5-Oct	460	43.4	19964
Total sales			48174