Exercise 5-5B Effect of inventory cost flow on ending inventory balance and gross margin The Shirt Shop had the following transactions for T-shirts for Year 1, its first year of operations: Jan. 18 Purchased 300 units @$7 $2,100 Apr. 15 Purchased 400 units @ $12 4,800 July 21 Purchased 220 units @ $14 3,080 Sept. 5 Purchased 60 units @ $18 1,080 During the year, The Shirt Shop sold 800 T-shirts for $25 each 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, rounded to two decimal places. b. Compute the difference in gross margin between the FIFO and LIFO cost-flow assumptions. EXERCISE 5-5B a. The Shirt Shop Summary of Purchase Transactions 1/18 Purchased Units 300 @ $7 = $2,100 4/15 7/21 9/5 Available for Sale 980 $11,060 a. (1) FIFO Units Unit Total Cost Ending Inventory: From From Total Ending Inventory @ @ $ ss $ $ a. (2) LIFO Ending Inventory From Total Ending Inventory a. (3) Weighted Average Total Units Unit Total Cost @ + Total = $ + = Cost per Unit $ Ending Inventory *round two places units @ $ = b. FIFO Sales Cost of Goods Sold: Cost Less: $ Cost of Goods Sold Gross Margin LIFO Sales Cost of Goods Sold: Gross Margin b. Difference in gross margins: = $_ $ $ 55 $