Question

McCarthy Company has inventory of 8 units at a cost of $200 each on October 1. On October 2, it purchased 20 units at $205 each. 11 units are sold on October 4. Using the FIFO perpetual inventory method, what is the value of inventory after the October 4 sale

Answer 1

Answer:

Closing Inventory value is $3,485.

Explanation:

FIFO is the inventory costing method which assumes that the item purchased earlier will be sold first and the item purchases at last will be sold at last.

According to FIFO the inventory cost of McCarthy Company is as follow:

Date           Description    Price   Unit      Total    Balance

October 1     Opening      $200     8       $1,600   $1,600

October 2    Purchases   $205     20     $4,100   $5,700

October 4    Sales           $200      8       $1,600   $4,100

                    Sales           $205      3        $615     $3,485

Closing Inventory value is $3,485.