You are the vice president of finance of Sheffield Corporation, a retail company that prepared two different schedules of gross margin for the first quarter ended March 31, 2017. These schedules appear below.

Sales

($5 per unit)

Cost of

Goods Sold

Gross

Margin

Schedule 1 $148,300 $124,674 $23,626

Schedule 2 148,300 130,902 17,398

The computation of cost of goods sold in each schedule is based on the following data.

Units

Cost

per Unit

Total

Cost

Beginning inventory, January 1 11,050 $4.10 $45,305

Purchase, January 10 9,050 4.20 38,010

Purchase, January 30 7,050 4.30 30,315

Purchase, February 11 10,050 4.40 44,220

Purchase, March 17 12,050 4.50 54,225

Jane Torville, the president of the corporation, cannot understand how two different gross margins can be computed from the same set of data. As the vice president of finance, you have explained to Ms. Torville that the two schedules are based on different assumptions concerning the flow of inventory costs, i.e., FIFO and LIFO. Schedules 1 and 2 were not necessarily prepared in this sequence of cost flow assumptions.

Prepare two separate schedules computing cost of goods sold and supporting schedules showing the composition of the ending inventory under both cost flow assumptions.

Sheffield Corporation

Schedules of Cost of Goods Sold

For the First Quarter Ended March 31, 2017

Schedule 1

First-in, First-out

Schedule 2

Last-in, First-out

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Schedules Computing Ending Inventory

First-in, First-out (Schedule 1)

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Last-in, First-out (Schedule 2)

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