Question

Perpetual inventory using FIFO

Beginning inventory, purchases, and sales for Item Zeta9 are as follows:

Oct. 1 Inventory 64 units @ $24

Oct 7 Sale 49 units

Oct 15 Purchase 76 units @ $28

Oct 24 Sale 24 units

Assuming a perpetual inventory system and using the first-in, first-out (FIFO) method, determine (a) the cost of goods sold on October 24 and (b) the inventory on October 31.

Answer 1

Date	Purchases	Cost of goods sold	Balance
Oct 1	Beginning = 64 units x $ 24 = $ 1,536		64 units x $ 24 = $ 1,536
Oct 7		49 units x $ 24 = $ 1,176	15 units x $ 24 = $ 360
Oct 15	76 units x $ 28 = $ 2,128		15 units x $ 24 = $ 360 76 units x $ 28 = $ 2,128
Oct 24		15 units x $ 24 = $ 360 9 units x $ 28 = $ 252	67 units x $ 28 = $ 1,876

Under FIFO method, first purchased or available units are sold out first. In the above case first sale of 49 units are sold from beginning inventory. Second sale of 24 units consists of 15 units balance in beginning inventory and balance 9 units from first purchase.

Cost of goods sold = (49 units x $ 24) + (15 units x $ 24) + ( 9 units x $ 28)

Cost of goods sold = $ 1,788.

Ending inventory = 67 units x $ 28

Ending inventory = $ 1,876

SUMMARY:

A. Cost of goods sold = $ 1,788

B. Ending inventory = $ 1,876.