Exercise 5-20A (Algo) Effect of inventory cost flow on ending inventory balance and gross margin LO 5-
6
The Shirt Shop had the following transactions for T-shirts for Year 1, its first year of operations:
Jan. 20 Purchased
310 units
@
$ 7 = $2,170
Apr. 21
Purchased
150 units
@
$9=
1,350
July 25
Purchased
210 units
@
$10
2,100
Sept. 19
Purchased
90 units
@
$12
1,080
During the year, The Shirt Shop sold 560 T-shirts for $17 each.
Required
a. Compute the amount of ending inventory The Shirt Shop 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.
Complete this question by entering your answers in the tabs below.
Required A Required B