Question

The following data represent the beginning inventory and, in order of occurrence, the purchases and sales of Ilse's Garden, Inc., for an operating period.

	Units	Unit Cost		Total Cost		Units Sold
Beginning Inventory	30	$21		$630
Sale No. 1						20
Purchase No. 1	50	30		1,500
Sale No. 2						40
Purchase No. 2	20	33		660
Totals	100			$2,790		60

Assuming Ilse's Garden, Inc. uses FIFO periodic inventory procedures, the ending inventory cost is:

Select one:

A. $930

B. $1,320

C. $840

D. $1,260

Answer 1

Units in ending inventory = Units available for sale - Units sold

= 100 - 60

= 40

Under the First in first out (FIFO) method of inventory valuation, Cost of goods sold consists of the units from beginning inventory and earliest purchases. Ending inventory consists of the units from recent purchases.

40 units in ending inventory consists of 20 units from purchase no. 1 and 20 units from purchase no. 2

Ending inventory = (20 units * $30) + (20 units * $33)

= $600 + $660

= $1,260

The answer is Option D.