You are the vice president of finance of Kingbird Corporation, a retail company that prepared two different schedules of gross margin for the first quarter ended March 31, 2020. These schedules appear below. Sales ($5 per unit) Cost of Gross Goods Sold Margin Schedule 1 $148,300 $124,674 $23,626 Schedule 2 148,300 130,902 17,398 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 11,050 $4.10 $45,305 Purchase, January 10 9,050 4.20 38,010 Purchase, January 30 7,050 4.30 30,315 Purchase, February 11 10,050 4.40 44,220 Purchase, March 17 12,050 4.50 54,225 Michelle Walker, 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. Walker that the two schedules are based on different assumptions concerning the flow of inventory costs, i.e., FIFO and LIFO. Schedules 1 and 2 were not necessarily prepared in this sequence of cost flow assumptions. Prepare two separate schedules computing cost of goods sold and supporting schedules showing the composition of the ending inventory under both cost flow assumptions.
You are the vice president of finance of Kingbird Corporation, a retail company that prepared two different schedules of gross margin for the first quarter ended March 31, 2020. These schedules appear below. Sales ($5 per unit) Cost of Gross Goods Sold Margin Schedule 1 $148,300 $124,674 $23,626 Schedule 2 148,300 130,902 17,398 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 11,050 $4.10 $45,305 Purchase, January 10 9,050 4.20 38,010 Purchase, January 30 7,050 4.30 30,315 Purchase, February 11 10,050 4.40 44,220 Purchase, March 17 12,050 4.50 54,225 Michelle Walker, 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. Walker that the two schedules are based on different assumptions concerning the flow of inventory costs, i.e., FIFO and LIFO. Schedules 1 and 2 were not necessarily prepared in this sequence of cost flow assumptions. Prepare two separate schedules computing cost of goods sold and supporting schedules showing the composition of the ending inventory under both cost flow assumptions.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter5: The Income Statement And The Statement Of Cash Flows
Section: Chapter Questions
Problem 2MC: The following information is available for Cooke Company for the current year: The gross margin is...
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Transcribed Image Text:You are the vice president of finance of Kingbird Corporation, a retail company that prepared two different schedules of gross margin for the first quarter ended March 31, 2020. These
schedules appear below.
Sales
($5 per unit)
Cost of
Gross
Goods Sold
Margin
Schedule 1
$148,300
$124,674
$23,626
Schedule 2
148,300
130,902
17,398
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
11,050
$4.10
$45,305
Purchase, January 10
9,050
4.20
38,010
Purchase, January 30
7,050
4.30
30,315
Purchase, February 11
10,050
4.40
44,220
Purchase, March 17
12,050
4.50
54,225
Michelle Walker, 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. Walker that the two schedules are based on different assumptions concerning the flow of inventory costs, i.e., FIFO and LIFO. Schedules 1 and 2 were not necessarily prepared
in this sequence of cost flow assumptions.
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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