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Vaughn Company uses a periodic inventory system. Details for the inventory account for the month of...

Vaughn Company uses a periodic inventory system. Details for the inventory account for the month of January, 2018 are as follows:

Units Per unit price Total
Balance, 1/1/18 170 $5.00 $850
Purchase, 1/15/18 130 5.10   663
Purchase, 1/28/18 130 5.40   702


An end of the month (1/31/18) inventory showed that 220 units were on hand. If the company uses FIFO, what is the value of the ending inventory?

$1100

$1125

$1161

$1122

Business   Accounting   
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Homework Answers

Answer #1

Goods sold=Beginning inventory+Purchase-Ending inventory

=170+130+130-220

=210 units

As per FIFO;ending inventory=(90 units@$5.1)+(130 units@$5.4)

=$1161

NOTE:As per FIFO;goods purchased first are sold off first.Hence 210 units sold would consist of 170 units of beginning inventory and the balance=(210-170)=40 units of 1/15/18 purchases.

Hence units in ending inventory would be=(130-40)=90 units of 1/15/18 purchases and (220-90)=130 units of  1/28/18 purchases.

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