Hoover Company purchased two identical inventory items. The item purchased first cost $33.00. The item purchased second cost $35.00. Then Hoover sold one of the inventory items for $62.00. Based on this information, the amount of:
A) ending inventory is $35.00 if Hoover uses the LIFO cost flow method.
B) gross margin is $28.00 if Hoover uses the weighted average cost flow method.
C) cost of goods sold is $35.00 if Hoover uses the FIFO cost flow method.
D) cost of goods sold is $33.00 if Hoover uses the LIFO cost flow method.

Question

Quizplus · Accepted Answer

If Hoover uses LIFO, cost of goods sold will be $35.00 (most recent purchase) and ending inventory will be $33.00, not $35.00. If Hoover uses weighted average, the weighted average cost per unit is $34.00. Therefore, gross margin will be $28.00 ($62.00 Sales - $34.00 Cost of goods sold). If Hoover uses FIFO, cost of goods sold will be $33.00 (earliest purchase), not $35.00.

Hoover Company Purchased Two Identical Inventory Items