Question

A company had the following purchases and sales during its first year of operations:

	Purchases	Sales
January:	10 units at $120	6 units
February:	20 units at $125	5 units
May:	15 units at $130	9 units
September:	12 units at $135	8 units
November:	10 units at $140	13 units

On December 31, there were 26 units remaining in ending inventory. Using the periodic FIFO inventory costing method, what is the value of cost of goods sold? (Assume all sales were made on the last day of the month.)

Answer 1

Solution:

We know, in FIFO, first in first out.

Then, cost of goods sold:

First, we need to determine the number of units sold which is shown below:

Sold units = 41 units ( 6 + 5 + 9 +8 + 13)

Now, we determine from which purchases cost we need to account for the 41 sold units using FIFO method:

Months (a)	Purchased item in units (b)	Purchase price (c)	Purchase Cost (d = b × c)
January	10 units	$1,20	$1,200
February	20 units	$125	$2,500
March	11units	$130	$1,430
Total cost of goods sold			$5,130

The value of cost of goods sold =$5,130