The Shirt Shop had the following transactions for T-shirts for Year 1, its first year of operations: Jan. 20 Purchased 400 units 200 units $ 8 = $3,200 %3D Apr. 21 July 25 Sept. 19 Purchased Purchased = %$ $13 = 3,640 Purchased 000' 280 units 90 units $15 = 1,350 %3D During the year, The Shirt Shop sold 810 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.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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The Shirt Shop had the following transactions for T-shirts for Year 1, its first year of operations:
Jan. 20
Purchased
400 units
200 units
$ 8 = $3,200
%3D
Apr. 21
July 25
Sept. 19 Purchased
Purchased
= %$
$13 =
3,640
Purchased
000'
280 units
90 units
$15 =
1,350
%3D
During the year, The Shirt Shop sold 810 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.
Transcribed Image Text:The Shirt Shop had the following transactions for T-shirts for Year 1, its first year of operations: Jan. 20 Purchased 400 units 200 units $ 8 = $3,200 %3D Apr. 21 July 25 Sept. 19 Purchased Purchased = %$ $13 = 3,640 Purchased 000' 280 units 90 units $15 = 1,350 %3D During the year, The Shirt Shop sold 810 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.
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