Question

Required information

Use the following information for the Exercises below.

[The following information applies to the questions displayed below.]
  
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

220

units

@ $10.80

=

$

2,376

Jan.

10

Sales

190

units

@ $40.80

Mar.

14

Purchase

330

units

@ $15.80

=

5,214

Mar.

15

Sales

280

units

@ $40.80

July

30

Purchase

420

units

@ $20.80

=

8,736

Oct.

5

Sales

390

units

@ $40.80

Oct.

26

Purchase

120

units

@ $25.80

=

3,096

Totals

1,090

units

$

19,422

860

units

Exercise 6-7 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.

	Ending Inventory	Cost of Goods Sold
FIFO	$5,384	$14,038

2.

	Ending Inventory	Cost of Goods Sold
LIFO	$4,834	$14,588

3.

	FIFO	LIFO
Sales	$35,088	$35,088
Less: Cost of Goods Sold	$14,038	$14,588
Gross Margin	$21,050	$20,500

Computation of Ending inventory and COGS:

FIFO (Perpetual)
Date	Receipts				Cost of Goods Sold			Balance
	Description	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount
1-Jan	Beginning Inventory	220	$10.80	$2,376				220	$10.80	$2,376
10-Jan	Sales				190	$10.80	$2,052	30	$10.80	$324
14-Mar	Purchases	330	$15.80	$5,214				330	$15.80	$5,214
15-Mar	Sales				30	$10.80	$324
					250	$15.80	$3,950	80	$15.80	$1,264
30-Jul	Purchases	420	$20.80	$8,736				420	$20.80	$8,736
5-Oct	Sales				80	15.80	$1,264
					310	$20.80	$6,448	110	$20.80	$2,288
26-Oct	Purchases	120	$25.80	$3,096				120	$25.80	$3,096
	Ending	1,090		$19,422	860		$14,038	230		$5,384

LIFO (Perpetual)
Date	Receipts				Cost of Goods Sold			Balance
	Description	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount
1-Jan	Beginning Inventory	220	$10.80	$2,376				220	$10.80	$2,376
10-Jan	Sales				190	$10.80	$2,052	30	$10.80	$324
14-Mar	Purchases	330	$15.80	$5,214				330	$15.80	$5,214
15-Mar	Sales				280	$15.80	$4,424	50	$15.80	$790
30-Jul	Purchases	420	$20.80	$8,736				420	$20.80	$8,736
5-Oct	Sales				390	20.80	$8,112	30	$20.80	$624
26-Oct	Purchases	120	$25.80	$3,096				120	$25.80	$3,096
	Ending	1,090		$19,422	860		$14,588	230		$4,834