E8-19B (FIFO and LIFO Effects) You are the vice president of finance of Constance Corporation, a retail company that prepared two different schedules of gross margin for the first fiscal quarter ended July 31.
mujionostevoE8-19B (FIFO and LIFO Effects) You are the vice president of finance of Constance Corporation, a retail
company that prepared two different schedules of gross margin for the first fiscal quarter ended July 31.
These schedules appear below.
Sales Cost of Gross
($15 per unit) Goods Sold Margin
Schedule 1 $540,000 $220,700 $319,300
Schedule 2 540,000 227,050 312,950
The computation of cost of goods sold in each schedule is based on the following data.
Cost Total
Units per Unit Cost
Beginning inventory, May 1 10,000 $6.00 $60,000
Purchase, May 2 12,000 6.10 73,200
Purchase, June 5 15,000 6.25 93,750
Purchase, June 18 3,000 6.50 19,500
Purchase, July 7 8,000 6.60 52,800
Connie Miller, 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.
Miller 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.
Instructions
Prepare two separate schedules computing cost of goods sold and supporting schedules showing the omposition
of the ending inventory under both cost flow assumptions (assume periodic system).
12 years ago
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