4. Award: 2 out of 2.00 points2 out of 2.00 points
Score:Score: 10/10 Points 100 %
[The following information applies to the questions displayed below.]
Hemming Co. reported the following current-year purchases and sales for its only product.
Date Activities Units Acquired at Cost Units Sold at Retail
Jan. 1 Beginning inventory 230 units @ $11.20 = $ 2,576
Jan. 10 Sales 160 units @ $41.20
Mar. 14 Purchase 350 units @ $16.20 = 5,670
Mar. 15 Sales 320 units @ $41.20
July 30 Purchase 430 units @ $21.20 = 9,116
Oct. 5 Sales 400 units @ $41.20
Oct. 26 Purchase 130 units @ $26.20 = 3,406
To t a l s 1,140 units $20,768 880 units
Required:
Hemming uses a perpetual inventory system. Assume that ending inventory is made up of 50 units from the March 14 purchase, 80 units from the July 30 purchase,
and all 130 units from the October 26 purchase. Using the specific identification method, calculate the following.
a) Cost of Goods Sold using Specific Identification
Available for Sale Cost of Goods Sold Ending Inventory
Date Activity Units Unit
Cost
Units
Sold
Unit
Cost COGS
Ending
Inventory
Units
Unit
Cost
Ending
Inventory
Cost
Jan. 1 Beginning Inventory 230
$
11.20 !230 !$11.20 $2,576 0$11.20 $0
Mar. 14 Purchase 350
$
16.20 !300 !$16.20 4,860 50 !$16.20 810
July 30 Purchase 430
$
21.20 !350 !$21.20 7,420 80 !$21.20 1,696
Oct. 26 Purchase 130
$
26.20 !0$26.20 0130 !$26.20 3,406
1,140 880 $14,856 260 $5,912
b) Gross Margin using Specific Identification
Sales !
$36,256 !
Less:
Cost of goods sold !
(14,856) !
Required:
Hemming uses a perpetual inventory system. Assume that ending inventory is made up of 50 units from the March 14 purchase, 80 units from the July 30 purchase,
and all 130 units from the October 26 purchase. Using the specific identification method, calculate the following.
$
$
$
$
$
$
a) Cost of Goods Sold using Specific Identification
Available for Sale Cost of Goods Sold Ending Inventory
Date Activity Units Unit
Cost
Units
Sold Unit Cost COGS
Ending
Inventory
Units
Unit Cost
Ending
Inventory
Cost
Jan. 1 Beginning Inventory 230 11.20 230
Mar. 14 Purchase 350 16.20 300 50
July 30 Purchase 430 21.20 350 80
Oct. 26 Purchase 130 26.20 130
b) Gross Margin using Specific Identification
Sales 36,256
Less: Cost of goods sold (14,856)
Equals: Gross margin 21,400
$11.20 $2,576 $11.20 $ 0
$16.20 4,860 $16.20 810
$21.20 7,420 $21.20 1,696
$26.20 0 $ 26.20 3,406
1,140 880 $14,856 260 $5,912
F F F F
F F F F
F F F F
F F F F
F F F F F
Explanation:
(a) Specific identification method—Cost of goods sold
Cost of goods available for sale $20,768
Ending inventory under specific identification
3/14 purchase (50 @ $16.20) $ 810
7/30 purchase (80 @ $21.20) 1,696
10/26 purchase (130 @ $26.20) 3,406
Total ending inventory under specific identification 5,912
Cost of goods sold under specific identification $14,856
(b) Specific identification method—Gross margin
Sales Revenue (880 units sold × $41.20 selling price) $ 36,256
Less: Specific identification cost of goods sold 14,856
Gross profit $21,400
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