EFFECT OF YEAR-END PURCHASES. Palmquist Company has a periodic inventory system and uses LIFO. The following information is available for 19x8:

REQUIRED:
1. Compute the gross margin for 19x8.
2. Suppose that purchase 3 had been delayed until after January 3, 19x9. Recompute the amount of gross margin for 19x8.
3. Suppose that purchase 3 had been for 15,000 units at $11 on December 20 rather than 10,000 units at $11. Recompute the amount of gross margin for 19x8.
4. What do you conclude about the effect of purchases made late in the year on gross margin when LIFO is employed?
5. Assume that Palmquist uses FIFO rather than LIFO. Recompute the amount of gross margin under each of the conditions specified in requirements 1, 2, and 3 above. What do you conclude about the effect of purchases made late in the year on gross margin when FIFO is employed?

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Beginning inventory Purchase 1, 2/25 Purchase 2, 7/15 Purchase 3, 12/20 3,000 units at $6.50 12,000 units at $7.80 20,000 units at $9.00 10,000 units at $11.00 During 19x8, 31,000 units were sold at $16.00 per unit, resulting in an inventory at December 31, 19x8, of 14,000 units.