Accounting

The Patterson Company sells two products, Tog and Uni. Tog sells for $850 per unit, and Uni has a price of $1,300. Patterson uses the perpetual inventory system and uses the net price method of accounting for purchase discounts. On December 1, 2010, Patterson had 70 units of Tog at a cost of $400 each and 20 units of Uni at a cost of $740 each. During the month of December 2010, Patterson had the following transactions:

Dec.

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1 Purchased 20 units of Tog from Quirin Corporation on account for $410 each; terms 2/10, n/30, FOB destination.

3 Sold six units of Uni to Mahoney Corporation on account; terms n/EOM (end-of-month) and FOB destination.

4 Paid $88 freight on the shipment to Mahoney.

5 Purchased 25 units of Uni from Deitz Co. on account for $760 each; terms 1/15, n/30, FOB destination.

15 Sold 30 units of Tog to the Utica Corporation on account; terms n/30, FOB shipping point.

16 Returned five units of Uni that were defective to Deitz Co.

20 Paid the amount due to Deitz Co.

22 Sold 25 units of Uni to Tasco Corp. for cash.

30 Collected amount due from Mahoney Corporation from December 3 sale.

31 Paid amount due to Quirin Corporation

Required:

A. Make the entries for these transactions using the FIFO cost flow assumption.

B. Make the entries for these transactions using the LIFO cost flow assumption.

C. What is the amount of gross margin and ending inventory under FIFO?

D. What is the amount of gross margin and ending inventory under LIFO?

E. What is the difference in the gross margin, ending inventory, and cash flows between these two methods?

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