Sandy Alomar Corp., Prepare two schedules for inventory costs under LIFO and FIFO

You are vice-president of finance of Sandy Alomar Corp., a retail company that prepared 2 different schedules of gross margin for the first quarter ended March 31, 2007. These schedules appear below:

                       Sales ($5 per unit)    cost of goods sold   gross margin

Schedule 1           $150,000                  124,900            25,100

Schedule 2            150,000                  129,400            20,600 

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

                                    Units                Cost per unit                Total cost

Beg. Inventory, Jan 1   10,000             $4.00                           $40,000 

Purchase, Jan 10          8,000               4.20                             33,600 

Purchase, Jan 30          6,000               4.25                             25,500 

Purchase, Feb 11         9,000               4.30                             38,700 

Purchase, March 17     11,000             4.40                             48,400

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

Instructions:

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