Question: You are the vice president of finance of Sandhill Corporation, a retail company that prepared two different schedules of gross margin for the first quarter ended March 31, 2017. These schedules appear below: Sales ($5 per unit) Cost of Goods Sold Gross Margin Schedule 1 $149,800 $135,492 $14,308 Schedule 2 149,800 140,640 9,160 The computation of cost of goods sold in each schedule is based on the following data: Units Cost per Unit Total Cost Beginning inventory, January 1 10,200 $4.40 Purchase, January 10 8,200 4.50 Purchase, January 30 6,200 4.60 Purchase, February 11 9,200 4.70 Purchase, March 17 11,200 4.80 $44,880 36,900 28,520 43,240 53,760 Jane Torville, the president of the corporation, cannot understand how two different gross margins can be computed from the same set of data. As the vice president of finance, you have explained to Ms. Torville that the two schedules are based on different assumptions concerning the flow of inventory costs, Le., FIFO and LIFO. Schedules 1 and 2 were not necessarily prepared in this sequence of cost flow assumptions. Required: Prepare two separate schedules, computing cost of goods sold and supporting schedules, showing the composition of the ending inventory under both cost flow assumptions.
Question: You are the vice president of finance of Sandhill Corporation, a retail company that prepared two different schedules of gross margin for the first quarter ended March 31, 2017. These schedules appear below: Sales ($5 per unit) Cost of Goods Sold Gross Margin Schedule 1 $149,800 $135,492 $14,308 Schedule 2 149,800 140,640 9,160 The computation of cost of goods sold in each schedule is based on the following data: Units Cost per Unit Total Cost Beginning inventory, January 1 10,200 $4.40 Purchase, January 10 8,200 4.50 Purchase, January 30 6,200 4.60 Purchase, February 11 9,200 4.70 Purchase, March 17 11,200 4.80 $44,880 36,900 28,520 43,240 53,760 Jane Torville, the president of the corporation, cannot understand how two different gross margins can be computed from the same set of data. As the vice president of finance, you have explained to Ms. Torville that the two schedules are based on different assumptions concerning the flow of inventory costs, Le., FIFO and LIFO. Schedules 1 and 2 were not necessarily prepared in this sequence of cost flow assumptions. Required: Prepare two separate schedules, computing cost of goods sold and supporting schedules, showing the composition of the ending inventory under both cost flow assumptions.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Question:
You are the vice president of finance of Sandhill Corporation, a retail company that
prepared two different schedules of gross margin for the first quarter ended March 31,
2017.
These schedules appear below:
Sales ($5 per unit)
Cost of Goods Sold Gross Margin
Schedule 1 $149,800
$135,492
$14,308
Schedule 2 149,800
140,640
9,160
The computation of cost of goods sold in each schedule is based on the following data:
Units Cost per Unit Total Cost
Beginning inventory, January 1 10,200
$4.40
Purchase, January 10
8,200 4.50
Purchase, January 30
6,200 4.60
Purchase, February 11
9,200 4.70
Purchase, March 17
11,200 4.80
$44,880
36,900
28,520
43,240
53,760
Jane Torville, the president of the corporation, cannot understand how two different
gross margins can be computed from the same set of data.
As the vice president of finance, you have explained to Ms. Torville that the two
schedules are based on different assumptions concerning the flow of inventory costs,
Le., FIFO and LIFO.
Schedules 1 and 2 were not necessarily prepared in this sequence of cost flow
assumptions.
Required:
Prepare two separate schedules, computing cost of goods sold and supporting
schedules, showing the composition of the ending inventory under both cost flow
assumptions.
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