Question

Goodman Company's inventory records show the following data: Units 5,000 4,500 3,000 Unit Cost $9.00 8.20 7.00 Inventory, January 1 Purchases: June 18 November 8 A physical inventory on December 31 shows 3,000 units on hand. Under the FIFO method, the December 31 inventory is O A. $21,000. O B. $27,000. C. $24,696. O D. $24,600.

Answer 1

Answer:

A. 3000 units x $7 = $21000

Explanation:

FIFO (First-In-First-Out) is a method of inventory valuation where the stock that is purchased first is used first. In other words, the oldest stock is used first. This is common for perishable items which if not used up fast, will be wasted.

Jan 01 - Beginning inventory : 5000 units x $9 = $45000

Jun 18 - Purchases : 4500 units x $8.20 = $36900

Nov 08 - Purchases : 3000 units x $7 = $21000

Total inventory = 5000 + 4500 + 3000 = 12,500 units

Ending inventory = 3,000 units

Hence, inventory sold = 9,500 units

The cost of goods sold using FIFO:

5000 units x $9 = $45000

4500 units x $8.20 = $36900

COGS = $45000 + $36900 = $81900 (9500 units)

Ending inventory :

3000 units x $7 = $21000 (3000 units)