You have the following information for Jewels Gems. Jewels Gems uses the periodic method of accounting for its inventory transactions. Jewels Gems only carries one brand and size of diamonds—all are identical. Each batch of diamonds purchased is carefully coded and marked with its purchase cost.March 1 Beginning inventory 150 diamonds at a cost of $310 per diamond.March 3 Purchased 200 diamonds at a cost of $350 each.March 5 Sold 180 diamonds for $600 each.March 10 Purchased 330 diamonds at a cost of $375 each.March 25 Sold 390 diamonds for $650 eachAssume that Jewels Gems uses the FIFO cost flow assumption. Calculate cost of goods sold. How much gross profit would the company report under this cost flow assumption?Assume that Jewels Gems uses the LIFO cost flow assumption. Calculate cost of goods sold. How much gross profit would the company report under this cost flow assumption?

Inventory cost flow assumptions: These are the methods used by the companies to compute the cost…

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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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You have the following information for Jewels Gems. Jewels Gems uses the periodic method of accounting for its inventory transactions. Jewels Gems only carries one brand and size of diamonds—all are identical. Each batch of diamonds purchased is carefully coded and marked with its purchase cost.

March 1		Beginning inventory 150 diamonds at a cost of $310 per diamond.
March 3		Purchased 200 diamonds at a cost of $350 each.
March 5		Sold 180 diamonds for $600 each.
March 10		Purchased 330 diamonds at a cost of $375 each.
March 25		Sold 390 diamonds for $650 each

Assume that Jewels Gems uses the FIFO cost flow assumption. Calculate cost of goods sold. How much gross profit would the company report under this cost flow assumption?

Assume that Jewels Gems uses the LIFO cost flow assumption. Calculate cost of goods sold. How much gross profit would the company report under this cost flow assumption?

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