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.
|
Jan. 20 |
Purchased 75 units @ $15 |
= |
$1,125 |
|
Apr. 21 |
Purchased 450 units @ $20 |
= |
9,000 |
|
July 25 |
Purchased 300 units @ $23 |
= |
6,900 |
|
Sept. 19 |
Purchased 100 units @ $26 |
= |
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.