Question

Tetra Co. uses the perpetual inventory system and a FIFO cost flow method. On January 1, the company purchased 2,400 units of inventory that cost $4.0 each. On January 12, the company purchased an additional 3,400 units of inventory at a cost of $3.10 each. On January 20, Tetra Company sold 4,400 units of inventory. Which of the following entries would be required to recognize the cost of goods sold on that date?
a. Inventory 11,800
Cost of Goods sold 11,800

b. Cost of Goods sold 11,900
Inventory 11,900

c. Cost of Goods sold 11,800
Inventory 11,800

d. Inventory 11,900
Cost of Goods sold 11,900


1. Option A
2. Option B
3. Option C
4. Option D

Answer 1

Answer:

The options are not correct:

Dr costs of good sold  $15,800

Cr inventory                                   $15,800

Explanation:

The 4,400 units sold consist of the 2,400 units purchased on 1 January at $4.00 per unit and the balance of 2,000 units from the purchase made on January 12 at $3.10 per unit

cost of goods sold=(2,400*$4)+(2,000*$3.10)=$15,800

The cost of goods sold is $15,800 ,neither is it $11,900 nor $11,800

The appropriate entries is to debit costs of good sold with $15,800 while merchandise inventory is credited with $15,800