Assuming that Anderson uses the FIFO flow assumption, it should record this inventory shrinkage by:
A) Crediting Cost of Goods Sold $7,500.
B) Debiting Cost of Goods Sold $7,000.
C) Crediting Cost of Goods Sold $7,000.
D) Debiting Cost of Goods Sold $7,500.

Question

Quizplus · Accepted Answer

Under the FIFO method, the cost of the first items purchased are assigned to cost of goods sold first. Therefore, the cost of the 500 units that were lost would be based on the cost of the most recent purchase. Since the cost of the most recent purchase was $15 per unit and 500 units were lost, the cost assigned to cost of goods sold would be $7,500 (500 units x $15 per unit). To record this, Cost of Goods Sold account would be debited for $7,500.

Assuming That Anderson Uses the FIFO Flow Assumption, It Should