Question

A Calculate inventory amounts when costs are rising (LO6-3)

Answer 1

Answer:

Using FIFO to calculate inventory amounts when costs are rising:

                                               Unit      Unit Cost    Total Cost

Jan. 1 Beginning inventory       58      $ 50           $ 2,900

Apr. 7 Purchase                       138          52               7,176

Jul. 16 Purchase                     208          55              11,440

Oct. 6 Purchase                       118          56              6,608

                                               522                        $ 28,124

b) Less Cost of Sales             444                       $ 23,756

a) Ending Inventory                   78         56           $ 4,368

c) Sales                                    444         68          $30,192

Cost of Goods Sold                444                       $23,756

d) Gross Profit                                                        $6,436

Explanation:

FIFO is one of the methods for computing inventory.  It is First in, First Out based on the concept that goods that were purchased first would be the first to be sold.  When there are rising prices and goods are of perishable nature, it makes sense to sell the goods that were bought first.