Problem:
Dugan Sales had the following transactions for jackets in 2013, its first year of operations:
- Jan. 20 Purchased 80 units @ $15 = $1,200
- Apr. 21 Purchased 420 units @ $16 = $ 6,720
- July 25 Purchased 250 units @ $20 = $5,000
- Sept. 19 Purchased 150 units @ $22 = $ 3,300
During the year, Dugan Sales sold 830 jackets for $40 each.
Required:
Question 1: Compute the amount of ending inventory Dugan would report on the balance sheet, assuming the following cost flow assumptions: (1) FIFO, (2) LIFO, and (3) weighted average.
Question 2: Record the above transactions in general journal form and post to T-accounts using (1) FIFO, (2) LIFO, and (3) weighted average. Use a seperate set of journal entries and T-accounts for each method. Assume all transactions are cash transactions.
Question 3: Compute the difference in gross margin between the FIFO and LIFO cost flow assumptions.
Note: Provide support for your rationale.