E8-19 (FIFO and LIFO Effects) You are the vice-president of finance of Sandy Alomar Corporation, a retail company that prepared two different schedules of gross margin for the first quarter ended March 31, 2007. These schedules appear below. LO 5
Sales Cost of Gross
($5 per unit) Goods Sold Margin
Schedule 1 $150,000 $124,900 $25,100
Schedule 2 150,000 129,400 20,600
The computation of cost of goods sold in each schedule is based on the following data.
Units per Unit Cost
Beginning inventory, January 1 10,000 $4.00 $40,000
Purchase, January 10 8,000 4.20 33,600
Purchase, January 30 6,000 4.25 25,500
Purchase, February 11 9,000 4.30 38,700
Purchase, March 17 11,000 4.40 48,400
Jane Torville, the president of the corporation, cannot understand how two different gross margins can be computed from the same set of data. As the vice-president of finance you have explained to Ms. Torville that the two schedules are based on different assumptions concerning the flow of inventory costs, i.e., FIFO and LIFO. Schedules 1 and 2 were not necessarily prepared in this sequence of cost flow assumptions.
Prepare two separate schedules computing cost of goods sold and supporting schedules showing the composition of the ending inventory under both cost flow assumptions.
Chapter 8 Valuation of Inventories: A Cost-Basis Approach
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.Read more
Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.Read more
Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.Read more
By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.Read more