Concept explainers
Perpetual: Inventors- costing methods—FIFO and LIFO£1
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........ | 200 units@ $10 = $ 2,000 | |
Jan. | 10 | Sales..................... | 150 units@ $40 | |
Mar | 14 | Purchase................. | 350 units @ $15 = 5,250 | |
Mar | 15 | Sales..................... | 300 units @ $40 | |
July | 30 | Purchase................. | 450 units @ $20 = 9,000 | |
Oct | 5 | Sales..................... | 430 units @ $40 | |
Oct. | 26 | Purchase................. | 100 units @ $25 = 2,500 | |
Totals.................... | 1,100 units $18,750 | 880 units |
Required
Hemming uses a perpetual inventory system. Determine the costs assigned to ending inventory and to cost of goods sold using (a) FIFO and (b) LIFO. Compute the gross margin for each method. (Round amounts to cents.)
Check Ending inventory: LIFO, $4,150
Calculate the cost assigned to ending inventory, when costs are assigned based on the FIFO and LIFO method.
Explanation of Solution
PERPERTUAL INVENTORY - FIFO METHOD | |||||||||
Date | Goods Purchased | Cost of Goods sold | Inventory Balance | ||||||
Units | Per unit | Amount | Units | Per unit | Amount | Units | Per unit | Amount | |
1-Jan | 200 | $10 | $2,000 | ||||||
10-Jan | 150 | $10 | $1,500 | 50 | $10 | $500 | |||
14-Mar | 350 | $15 | $5,250 | 50 | $10 | $500 | |||
350 | $15 | $5,250 | |||||||
400 | $5,750 | ||||||||
15-Mar | 50 | $10 | $500 | ||||||
250 | $15 | $3,750 | 100 | $15 | $1,500 | ||||
30-Jul | 450 | $20 | $9,000 | 100 | $15 | $1,500 | |||
450 | $20 | $9,000 | |||||||
550 | $10,500 | ||||||||
5-Oct | 100 | $15 | $1,500 | ||||||
330 | $20 | $6,600 | 120 | $20 | $2,400 | ||||
26-Oct | 100 | $25 | $2,500 | 120 | $20 | $2,400 | |||
100 | $25 | $2,500 | |||||||
220 | $4,900 |
Table (1)
Therefore, cost assigned to ending inventory for Perpetual FIFO method amount is $4,900.
PERPERTUAL INVENTORY - LIFO METHOD | |||||||||
Date | Goods Purchased | Cost of Goods sold | Inventory Balance | ||||||
Units | Per unit | Amount | Units | Per unit | Amount | Units | Per unit | Amount | |
1-Jan | 200 | $10 | $2,000 | ||||||
10-Jan | 150 | $10 | $1,500 | 50 | $10 | $500 | |||
14-Mar | 350 | $15 | $5,250 | 50 | $10 | $500 | |||
350 | $15 | $5,250 | |||||||
400 | $5,750 | ||||||||
15-Mar | 300 | $150 | $45,000 | 50 | $10 | $500 | |||
50 | $15 | $750 | |||||||
100 | $1,250 | ||||||||
30-Jul | 450 | $20 | $9,000 | 50 | $10 | $500 | |||
50 | $15 | $750 | |||||||
450 | $20 | $9,000 | |||||||
550 | $10,250 | ||||||||
5-Oct | 430 | $20 | $8,600 | 50 | $10 | $500 | |||
50 | $15 | $750 | |||||||
20 | $20 | $400 | |||||||
100 | $25 | $2,500 | |||||||
220 | $4,150 |
Table (2)
Therefore, cost assigned to ending inventory for Perpetual FIFO method amount is $4,150.
Calculate gross profit.
Particulars | FIFO | LIFO |
Amount | Amount | |
Sales (880 units ×$40 ) | $35,200 | $35,200 |
Less: Cost of goods sold | $13,850 | $16,450 |
Gross margin | $21,350 | $18,750 |
Table (3)
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Chapter 6 Solutions
Principles of Financial Accounting, Chapters 1-17 - With Access (Looseleaf)
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