Question

A company had the following purchases and sales during its first year of operations: Purchases Sales January: 10 units at $120 6 units February: 20 units at $125 5 units May: 15 units at $130 9 units September: 12 units at $135 8 units November: 10 units at $140 13 units On December 31, there were 26 units remaining in ending inventory. Using the perpetual FIFO inventory costing method, what is the cost of the ending inventory? (Assume all sales were made on the last day of the month.)

Answer 1

Answer:

Ending Inventory $ 3540

Explanation:

FIFO means first in first out. This rule applies to counting of the inventory in such a way that the units first purchased are sold out first. The following schedule has been prepared to arrive at the ending inventory at each date of sale .

Purchases                                   Sales                  Ending Inventory

January: 10 units at $120            6 units              4 units at $120

February: 20 units at $125         5 units                19 units at $125

May: 15 units at $130                   9 units               10  units at $125

                                                                               15  units at $130    

September: 12 units at $135       8 units              2  units at $125

                                                                            15  units at $130

                                                                             12 units at $135

November: 10 units at $140       13 units             4 units at $130

                                                                             12 units at $135

                                                                            10 units at $140

On December 31, there were 26 units remaining in ending inventory

Ending Inventory = $ 3540= $ 520 + $1620 + $1400

4 units at $130 = $ 520

12 units at $135 = $ 1620

 10 units at $140= $ 1400