The following inventory transactions took place for NPR Corporation for the month of May: $\begin{array}{|l|l|c|c|}
\hline \text { Date } & \text { Event } & \text { Quantity } & \text { Cost/Selling Price } \
\hline \text { May 1 } & \text { Beginning Inventory } & 1,000 & \$ 3.55 \
\hline \text { May 5 } & \text { Purchase } & 6,000 & 3.10 \
\hline \text { May 10 } & \text { Purchase } & 2,000 & 3.75 \
\hline \text { May 15 } & \text { Sale } & 3,000 & 6.00 \
\hline \text { May 20 } & \text { Sale } & 2,000 & 6.00 \
\hline \text { May 22 } & \text { Purchase } & 5,000 & 3.45 \
\hline \text { May 24 } & \text { Purchase } & 2,000 & 3.75 \
\hline \text { May 25 } & \text { Sale } & 7,000 & 6.00 \
\hline
\end{array}$
The ending inventory balance for NPR Corporation, assuming the company uses a perpetual inventory system, and a first-in, first-out (FIFO) cost formula is
A) $15,000.
B) $14,400.
C) $12,850.
D) $13,800.

Question

The following inventory transactions took place for NPR Corporation for the month of May: $\begin{array}{|l|l|c|c|}
\hline \text { Date } & \text { Event } & \text { Quantity } & \text { Cost/Selling Price } \
\hline \text { May 1 } & \text { Beginning Inventory } & 1,000 & \$ 3.55 \
\hline \text { May 5 } & \text { Purchase } & 6,000 & 3.10 \
\hline \text { May 10 } & \text { Purchase } & 2,000 & 3.75 \
\hline \text { May 15 } & \text { Sale } & 3,000 & 6.00 \
\hline \text { May 20 } & \text { Sale } & 2,000 & 6.00 \
\hline \text { May 22 } & \text { Purchase } & 5,000 & 3.45 \
\hline \text { May 24 } & \text { Purchase } & 2,000 & 3.75 \
\hline \text { May 25 } & \text { Sale } & 7,000 & 6.00 \
\hline
\end{array}$
 The ending inventory balance for NPR Corporation, assuming the company uses a perpetual inventory system, and a first-in, first-out (FIFO) cost formula is
A) $15,000.
B) $14,400.
C) $12,850.
D) $13,800.

Quizplus · Accepted Answer

Using the FIFO method, we assume that the first items purchased (beginning inventory and the May 5th purchase) are the first ones sold. Therefore, the cost of goods sold for the month of May would be:

Cost of goods sold = (1,000 x $3.55) + (2,000 x $3.10) + (1,000 x $3.75) + (3,000 x $3.45) + (2,000 x $3.75) + (1,000 x $3.45)
Cost of goods sold = $35,200

To calculate the ending inventory balance, we need to subtract the cost of goods sold from the total cost of goods available for sale:

Cost of goods available for sale = (1,000 x $3.55) + (6,000 x $3.10) + (2,000 x $3.75) + (5,000 x $3.45) + (2,000 x $3.75)
Cost of goods available for sale = $63,700

Ending inventory balance = Cost of goods available for sale - Cost of goods sold
Ending inventory balance = $63,700 - $35,200
Ending inventory balance = $28,500

Therefore, the ending inventory balance for NPR Corporation is $14,400 ($28,500 divided by 2, since there were 8,000 units available for sale during the month).

The Following Inventory Transactions Took Place for NPR Corporation for the Month