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   Hemming Co. reported the following current-year purchases and sales for its only product.      Date Activities Units Acquired at Cost Units...

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Accounting

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

DateActivitiesUnits Acquired at CostUnits Sold at Retail
Jan.1Beginning inventory300units@ $14.00=$4,200
Jan.10Sales250units@ $44.00
Mar.14Purchase520units@ $19.00=9,880
Mar.15Sales460units@ $44.00
July30Purchase500units@ $24.00=12,000
Oct.5Sales480units@ $44.00
Oct.26Purchase200units@ $29.00=5,800
Totals1,520units$31,8801,190units

Exercise 5-7 Perpetual: Inventory costing methods-FIFO and LIFOLO P1

Required:
Hemming uses a perpetual inventory system.
  
1. Determine the costs assigned to endinginventory and to cost of goods sold using FIFO.
2. Determine the costs assigned to endinginventory and to cost of goods sold using LIFO.
3. Compute the gross margin for FIFO method andLIFO method.

Answer & Explanation Solved by verified expert
3.8 Ratings (536 Votes)

Ans. 1 FIFO:
Purchase Cost of goods sold Balance
Date Quantity Rate Total cost Quantity Rate Total cost Quantity Rate Total cost
1-Jan 300 $14.00 $4,200.00
10-Jan 250 $14.00 $3,500.00 50 $14.00 $700.00
14-Mar 520 $19.00 $9,880.00 50 $14.00 $700.00
520 $19.00 $9,880.00
15-Mar 50 $14.00 $700.00
410 $19.00 $7,790.00 110 $19.00 $2,090.00
30-Jul 500 $24.00 $12,000.00 110 $19.00 $2,090.00
500 $24.00 $12,000.00
5-Oct 110 $19.00 $2,090.00
370 $24.00 $8,880.00 130 $24.00 $3,120.00
26-Oct 200 $29.00 $5,800.00 130 $24.00 $3,120.00
200 $29.00 $5,800.00
Total Cost of goods sold $22,960 Cost of Ending inventory $8,920
*In FIFO method the units that have purchased first, are released the first one.
Ans. 2 LIFO:
Purchase Cost of goods sold Balance
Date Quantity Rate Total cost Quantity Rate Total cost Quantity Rate Total cost
1-Jan 300 $14.00 $4,200.00
10-Jan 250 $14.00 $3,500.00 50 $14.00 $700.00
14-Mar 520 $19.00 $9,880.00 50 $14.00 $700.00
520 $19.00 $9,880.00
15-Mar 460 $19.00 $8,740.00 50 $14.00 $700.00
60 $19.00 $1,140.00
30-Jul 500 $24.00 $12,000.00 50 $14.00 $700.00
60 $19.00 $1,140.00
500 $24.00 $12,000.00
5-Oct 480 $24.00 $11,520.00 50 $14.00 $700.00
60 $19.00 $1,140.00
20 $24.00 $480.00
26-Oct 200 $29.00 $5,800.00 50 $14.00 $700.00
60 $19.00 $1,140.00
20 $24.00 $480.00
200 $29.00 $5,800.00
Total Cost of goods sold $23,760 Cost of Ending inventory $8,120
*In LIFO method the units that have purchased last, are released the first one.
Ans. 3 FIFO LIFO
Sales $52,360 $52,360
Less: Cost of goods sold -$22,960 -$23,760
Gross margin $29,400 $28,600
Calculations for sales:
Date Units Rate Total
10-Jan 250 $44 $11,000
15-Mar 460 $44 $20,240
5-Oct 480 $44 $21,120
Total sales $52,360

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