Question

Beginning inventory, purchases, and sales for an inventory item are as follows: Sep. 1 Beginning Inventory 23 units $16 5 Sale 13 units 17 Purchase 24 units $17 30 Sale 25 units Assuming a perpetual inventory system and the first-in, first-out method, determine (a) the cost of the goods sold for the September 30 sale and (b) the inventory on September 30.

Answer 1

Answer:

(a) the cost of the goods sold for the September 30 sale and

• COGS = $415

(b) the inventory on September 30.

• Ending inventory = 9 units at $17 = $153

Explanation:

date        transaction           units         unit price          total

1              beginning inv.        23                $16               $368

5             sale                        -13                                    ($208)

17            purchase               24                 $17               $408

30           sale                       -25                                    ($415)

30           ending inv.              9                 $17               $153

When we use first in, first out (FIFO) inventory method, the price of the units sold are calculated using the oldest units in inventory.

The COGS of the units sold on Sept. 5 = 13 units x $16 = $208

The COGS of the units sold on Sept. 30 = (10 units x $16) + (15 units x $17) = $160 + $255 = $415

Ending inventory = 9 units at $17 = $153