Question

Addison, Inc. uses a perpetual inventory system. Below is information about one inventory item for the month of September. Use this information to answer the questions that follow. Sep. 1 Inventory 20 units at $20 4 Sold 10 units 10 Purchased 30 units at $25 17 Sold 20 units 30 Purchased 10 units at $30 ​ ​ If Addison uses FIFO, the cost of the ending inventory on September 30 is

Answer 1

Answer:

Cost of the ending inventory on September 30: $800

20 units $25 per unit, total $500

10 units $30 per unit, total $300

Explanation:

The FIFO is a method used to account value for inventory. Under the method, the first item of inventory purchased is the first one sold.

1. Sep. 1,  Inventory 20 units, $20 per unit. Total $400

2. Sep. 4 Sold 10 units

Cost of goods sold = 10 x $20 = $200

The inventory = $400 - $200 = $200 (10 units, $20 per unit)

3. Sep. 10 Purchased 30 units, $25 per unit

The inventory: $950

10 units, $20 per unit, total $200

30 units $25 per unit, total $750

4.Sep. 17 Sold 20 units

Cost of goods sold = 10 x $20 + 10 x $25 = $200 + $250 = $450

The inventory: 20 units $25 per unit, total $500

5.Sep. 30 Purchased 10 units, $30 per unit

Cost of the ending inventory on September 30: $800

20 units $25 per unit, total $500

10 units $30 per unit, total $300