Chapter 6, Problem 6.21AE

LO 2

(Learning Objective 2: Compare gross profit—FIFO vs. LIFO—falling prices) Suppose a Walmart store in Fillmore, Missouri, ended January 2018 with 900,000 units of merchandise that cost $5 each. Suppose the store then sold 50,000 units for $510,000 during February. Further, assume the store made two large purchases during February as follows:

Feb 10	10,000 units @ $3,10 = $31,000
21	25,000 units @ $2.20 = $55,000

Requirements

1.    Calculate the store’s gross profit under both FIFO and LIFO at February 28.

2.    What caused the FIFO and LIFO gross profit figures to differ?