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The Shirt Shop had the following transactions for T-shirts for Year 1, its first year of operations: January 20 April 21 July 25 410 units 130 units 230 units 80 units September 19 During the year, The Shirt Shop sold 680 T-shirts for $20 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. Purchased Purchased Purchased Purchased @ @ e e $12 $13 = $14 = $15 = $4,920 1,690 3,220 1,200

The Shirt Shop had the following transactions for T-shirts for Year 1, its first year of operations: January 20 April 21 July 25 410 units 130 units 230 units 80 units September 19 During the year, The Shirt Shop sold 680 T-shirts for $20 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. Purchased Purchased Purchased Purchased @ @ e e $12 $13 = $14 = $15 = $4,920 1,690 3,220 1,200

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The Shirt Shop had the following transactions for T-shirts for Year 1, its first year of operations: - **January 20**: Purchased 410 units @ $12 = $4,920 - **April 21**: Purchased 130 units @ $13 = $1,690 - **July 25**: Purchased 230 units @ $14 = $3,220 - **September 19**: Purchased 80 units @ $15 = $1,200 During the year, The Shirt Shop sold 680 T-shirts for $20 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. **Instructions:** Complete this question by entering your answers in the tabs below. **Difference in Gross Margin Calculation Table:** | | FIFO | LIFO | Difference | |---------|------|------|------------| | Gross Margin | | | |
Transcribed Image Text:The Shirt Shop had the following transactions for T-shirts for Year 1, its first year of operations: - **January 20**: Purchased 410 units @ $12 = $4,920 - **April 21**: Purchased 130 units @ $13 = $1,690 - **July 25**: Purchased 230 units @ $14 = $3,220 - **September 19**: Purchased 80 units @ $15 = $1,200 During the year, The Shirt Shop sold 680 T-shirts for $20 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. **Instructions:** Complete this question by entering your answers in the tabs below. **Difference in Gross Margin Calculation Table:** | | FIFO | LIFO | Difference | |---------|------|------|------------| | Gross Margin | | | |
### T-Shirt Shop Inventory and Cost Analysis **Transactions:** The Shirt Shop had the following transactions for T-shirts in Year 1, its first year of operations: - **January 20:** Purchased 410 units at $12 each, totaling $4,920. - **April 21:** Purchased 130 units at $13 each, totaling $1,690. - **July 25:** Purchased 230 units at $14 each, totaling $3,220. - **September 19:** Purchased 80 units at $15 each, totaling $1,200. During the year, 680 T-shirts were sold at $20 each. **Required Calculations:** **a.** Compute the ending inventory of T-shirts based on the following cost flow assumptions: 1. **FIFO (First-In, First-Out)** 2. **LIFO (Last-In, First-Out)** 3. **Weighted Average Cost** **b.** Calculate the difference in gross margin between the FIFO and LIFO cost flow assumptions. **Instructions for Completion:** - Input answers under the "Required A" and "Required B" tabs. - Note: Round intermediate calculations to two decimal places and final answers to the nearest whole dollar amount. **Table for Recording Results:** | | FIFO | LIFO | Weighted Average | |--------------|------|------|------------------| | Ending Inventory | | | | This analysis aids in understanding how different inventory valuation methods impact financial statements, specifically the ending inventory and gross margin.
Transcribed Image Text:### T-Shirt Shop Inventory and Cost Analysis **Transactions:** The Shirt Shop had the following transactions for T-shirts in Year 1, its first year of operations: - **January 20:** Purchased 410 units at $12 each, totaling $4,920. - **April 21:** Purchased 130 units at $13 each, totaling $1,690. - **July 25:** Purchased 230 units at $14 each, totaling $3,220. - **September 19:** Purchased 80 units at $15 each, totaling $1,200. During the year, 680 T-shirts were sold at $20 each. **Required Calculations:** **a.** Compute the ending inventory of T-shirts based on the following cost flow assumptions: 1. **FIFO (First-In, First-Out)** 2. **LIFO (Last-In, First-Out)** 3. **Weighted Average Cost** **b.** Calculate the difference in gross margin between the FIFO and LIFO cost flow assumptions. **Instructions for Completion:** - Input answers under the "Required A" and "Required B" tabs. - Note: Round intermediate calculations to two decimal places and final answers to the nearest whole dollar amount. **Table for Recording Results:** | | FIFO | LIFO | Weighted Average | |--------------|------|------|------------------| | Ending Inventory | | | | This analysis aids in understanding how different inventory valuation methods impact financial statements, specifically the ending inventory and gross margin.
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