Exercise 5-5 (Algo) Effect of inventory cost flow on ending inventory balance and gross margin LO 5-1 Skip to question [The following information applies to the questions displayed below.] The Shirt Shop had the following transactions for T-shirts for Year 1, its first year of operations: January 20 Purchased 330 units @ $12 = $ 3,960 April 21 Purchased 140 units @ $13 = 1,820 July 25 Purchased 250 units @ $14 = 3,500 September 19 Purchased 90 units @ $16 = 1,440 During the year, The Shirt Shop sold 630 T-shirts for $21 each.

Exercise 5-5 (Algo)

Part a 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. Note: Round intermediate calculations to 2 decimal places and final answers to nearest whole dollar amount.

b. Compute the difference in gross margin between the FIFO and LIFO cost flow assumptions.