Effect of inventory cost flow on ending inventory balance and gross margin
Bristol Sales had the following transactions for DVDs in 2012, its first year of operations.
Jan. 20 | Purchased 75 units @ $17 | = | $1,275 |
Apr. 21 | Purchased 450 units @ $19 | = | 8,550 |
July 25 | Purchased 200 units @ $23 | = | 4,600 |
Sept. 19 | Purchased 100 units @ $29 | = | 2,900 |
During the year, Bristol Sales sold 775 DVDs for $60 each.
Required
a. Compute the amount of ending inventory Bristol would report on the balance sheet, assuming the following cost flow assumptions: (1) FIFO, (2) LIFO, and (3) weighted average.
b. Record the above transactions in general journal form and post to T-accounts using (1) FIFO, (2) LIFO, and (3) weighted average. Use a separate set of journal entries and T-accounts for each method. Assume all transactions are cash transactions.
c. Compute the difference in gross margin between the FIFO and LIFO cost flow assumptions.
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