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Required information Exercise 5-20 Effect of inventory cost flow on ending inventory balance and gross margin...

Question:


Required information Exercise 5-20 Effect of inventory cost flow on ending inventory balance and gross margin LO 5-6 The foll
Exercise 5-20 Part a Required a. Compute the amount of ending inventory The Shirt Shop would report on the balance sheet, ass
Exercise 5-20 Part b b. Compute the difference in gross margin between the FIFO and LIFO cost flow assumptions. FIFO LIFO Dif
Required information Exercise 5-20 Effect of inventory cost flow on ending inventory balance and gross margin LO 5-6 The following information applies to the questions displayed below.] The Shirt Shop had the following transactions for T-shirts for 2018, its first year of operations: Jan. 20 Purchased Apr. 21 Purchased July 25 Purchased Sept. 19 Purchased 400 units 90 units 250 units 60 units @ @ @ @ $ 4 = $1,600 $5 = 450 $ 7 = 1,750 $ 9 = 540 During the year, The Shirt Shop sold 650 T-shirts for $14 each.
Exercise 5-20 Part a Required a. Compute the amount of ending inventory The Shirt Shop would report on the balance sheet, assuming the following cost flow assumptions: (1) FIFO, (2) LIFO, and (3) weighted average. Round intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount. FIFO LIFO Weighted Average Ending inventory
Exercise 5-20 Part b b. Compute the difference in gross margin between the FIFO and LIFO cost flow assumptions. FIFO LIFO Difference Gross margin

Answers

Requirement a

FIFO LIFO Weighted Average
Ending Inventory $                 1,170 $                       600 $                 815

Requirement b

FIFO LIFO Difference
Gross profit $           5,930.00 $             5,360.00 $           570.00

Working

Units Cost per unit value
Beginning Balance $ 0
Purchases
400 $                     4.00 $ 1,600
90 $                     5.00 $ 450
250 $                     7.00 $ 1,750
60 $                     9.00 $ 540
Total 800 $ 4,340

.

Average Cost of Inventory
Units (A) 800
Total Cost (B) $ 4,340
Average Cost (C=B/A) $                     5.43

.

FIFO
Total Units Available for sale 800
Units Sold 650
Closing Stock in Units 150
Valuation
Ending Inventory 60 @ $               9.00 $ 540
90 @ $               7.00 $ 630
Value Of Ending Inventory $ 1,170
Cost of Goods sold $ 3,170
LIFO
Total Units Available for sale 800
Units Sold 650
Closing Stock in Units 150
Valuation
Ending Inventory 150 @ $               4.00 $ 600
0 @ $             17.00 $ 0
Value Of Ending Inventory $                  600
Cost of Goods sold 4340 minus 600 $              3,740
Weighted Average method
Total Units Available for sale 800
Units Sold 650
Closing Stock in Units 150
Valuation
Ending Inventory 150 @ $               5.43 $                  815
Value Of Ending Inventory $                  815
Cost of Goods sold (Total Purchase and opening stock Minus Closing Stock) $              3,526
FIFO LIFO Difference
Sales revenue $           9,100.00 $             9,100.00
Cost of goods sold $           3,170.00 $             3,740.00
Gross profit $           5,930.00 $             5,360.00 $           570.00
.

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