Smith Company reported the following current-year data for its only product: Jan. 1 Beginning Inventory 200 Units @ $10 $2,000 Mar. 14 Purchase 350 Units @ $15 5,250 Jul. 30 Purchase 450 Units @ $20 9,000 Oct. 26 Purchase 700 Units @ $25 17,500 Units Available 1,70 0 Units Cost of Goods Available for Sale $33,75 0 Smith resold its products at $40 per unit on the following dates: Jan. 10 Sales 100 units Mar. 15 Sales 150 units Oct. 5 Sales 310 units Total Sales 560 units Smith uses a perpetual inventory system. Determine the costs assigned to cost of goods sold and ending inventory using (a) FIFO and (b) LIFO. Compute the gross margin for each method. Solution

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Smith Company reported the following current-year data for its only product:

Jan. 1Beginning Inventory200Units @ $10$2,000

Mar. 14Purchase350Units @ $155,250

Jul. 30Purchase450Units @ $209,000

Oct. 26Purchase700Units @ $2517,500

Units Available1,700Units

Cost of Goods Available for Sale$33,750

Smith resold its products at $40 per unit on the following dates:

Jan. 10Sales100units

Mar. 15Sales150units

Oct. 5Sales310units

Total Sales560units

Smith uses a perpetual inventory system. Determine the costs assigned to cost of goods sold and ending inventory using (a) FIFO and (b) LIFO. Compute the gross margin for each method.

Solution