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.Compute the difference in gross margin between the FIFO and LIFO cost flow assumptions.
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