5-5A Effect of inventory cost flow on ending inventory balance and gross margin.
Bristol Sales had the following transactions for DVDs in 2012, its first year of operations.
Jan. 20 Purchased 75 units @ $17 = $1,275
Apr. 21 Purchased 450 units @ $19 = $8,550
July 25 Purchased 200 units @ $23 = $4,600
Sept. 19 Purchased 100 units @ $29 = $2,900
During this year, Bristol Sales sold 775 DVDs for $60 each.
Required:
A. Compute the amount of ending inventory Bristol would report on the balance sheet, assuming the following cost flow assumptions: (1) FIFO, (2) LIFO, and (3) weighted average.
B. Record the above transactions in general journal form and post to T-accounts using (1) FIFO, (2) LIFO, and (3) weighted average. Use a separate set of journal entries and T-accounts for each method. Assume all transactions are cash transactions.
C. Compute the difference in gross margin between the FIFO and LIFO cost flow assumptions.