Question

Prepare a perpetual inventory​ record, using the FIFO inventory costing​ method, and determine the​ company's cost of goods​ sold, ending merchandise​ inventory, and gross profit. Begin by computing the cost of goods sold and cost of ending merchandise inventory using the FIFO inventory costing method. Enter the transactions in chronological​ order, calculating new inventory on hand balances after each transaction. Once all of the transactions have been entered into the perpetual​ record, calculate the quantity and total cost of merchandise inventory​ purchased, sold, and on hand at the end of the period.​

Answer 1

Answer:

The First-In, First-Out (FIFO) inventory costing method assumes that the inventory items ordered first are the first ones sold.

Step-by-step explanation:

The First-In, First-Out inventory costing method assumes that the inventory items ordered first are the first sold. This is ideal for goods that are highly perishable, for example fresh milk. Since no figures or dates are given, we will assume that the month is March 2019 and use any figures to make the example.

Date Item      Quantity of stock Cost Price

01  Opening stock bought on Feb 28  10   100

05  Sale of 5 goods (cost is $10 each)  (5)   50

15 Purchase of stock (20 goods at $20 each) 20   400

25 Sale of 15 goods                     (15)   250  

(5 at $10 each & 10 at $20 each)

31 Closing Stock               10   200

       (20 goods bought on 15th - 10 goods sold on 25th)

The quantity on hand at the end of the month is 10 units.  

Total cost of goods on hand at end of the month = 10 units * $20 = 200.

Total cost of goods purchased during the month = $20 * 20 units = $400

Total cost of goods sold during the month = [($10 *5) + ($10 * 5)+ ($20 * 10)] = $200