Question

Bristol Sales had the following transactions for DVD’s 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.
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. Record the above transactions in general journal form and post to T-accounts using (1) FIFO, (2) LIFO, and (3) weighted average. Use a separate set of journal entries and T-accounts for each method. Assume all transactions are cash transactions.
c. Compute the difference in gross margin between the FIFO and LIFO cost flow assumptions.

Answer 1

FIFO
75 x $17 = $1,275
450 x $19 = $8,550
200 x $23 = $4,600
43 x $29 = $1,247
Total cost of goods sold $15,672
Ending inventory $1,653
[$17,325 - 15,672]

LIFO
93 x $29 = $2,697
200 x $23 = $4,600
481 x $19 = $9,139
25 x $17 = $425
Total cost of goods sold $16,861
Ending inventory $464
[$17,325 - $16,861]