Effect of inventory cost flow on ending inventory balance and gross margin
Ross Sales had the following transactions for DVDs in 2010, its first year of operations.
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Jan. 20
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Purchased 75 units @ $15
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=
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$1,125
|
|
Apr. 21
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Purchased 450 units @ $20
|
=
|
9,000
|
|
July 25
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Purchased 300 units @ $23
|
=
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6,900
|
|
Sept. 19
|
Purchased 100 units @ $26
|
=
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2,600
|
During the year, Ross Sales sold 850 DVDs for $60 each.
Required
a. Compute the amount of ending inventory Ross would report on the balance sheet, assuming the following cost flow assumptions: (1) FIFO, (2) LIFO, and (3) weighted average.
b. Compute the difference in gross margin between the FIFO and LIFO cost flow assumptions.