The following units of an inventory item were available for sale during the year:

The firm uses the periodic inventory system.During the year,60 units of the item were sold.
The value of ending inventory using FIFO is:
A)$1,250
B)$1,350
C)$1,375
D)$1,150

Question

The following units of an inventory item were available for sale during the year:

The firm uses the periodic inventory system.During the year,60 units of the item were sold.
The value of ending inventory using FIFO is:
A)$1,250 
B)$1,350 
C)$1,375 
D)$1,150

Quizplus · Accepted Answer

According to the FIFO method, we assume that the units that were purchased first are sold first. So, the cost of goods sold will be based on the cost of the earliest units available, and the ending inventory will be based on the cost of the latest units available.

Calculation:
Cost of goods sold = 50 units x $20 = $1,000
Ending inventory = 10 units x $27.50 = $275

Therefore, the value of ending inventory using FIFO is $275, which is option C.

The Following Units of an Inventory Item Were Available for Sale