Question

Carstow uses the perpetual inventory method. Carstow had the following inventory transactions in May, 2001,
On May 1, Carstow had 200 units in inventory that cost $5 each.
On May 14, Carstow purchased 100 units at $10 each.
On May 20, Carstow purchased 100 units at $15 each.
On May 24, Carstow purchased 100 units at $20 each.
Carstow sold 350 units during May for $40 each.

What is the cost of Carstow's inventory at the end of May assuming Carstow uses the FIFO method?

Answer 1

Answer:
Cost of Ending Inventory = Cost of Goods available for Sale – Cost of Goods Sold
Cost of Goods available for Sale = Cost of Beginning Inventory + Cost of Purchases
Cost of Beginning Inventory = 200 Units * $5 = $1,000
Cost of Purchases = (100 units * $10) + (100 units * $15) + (100 units * $20)
Cost of Purchases = $1,000 + $1,500 + $2,000
Cost of Purchases = $4,500

Cost of Goods available for Sale = $1,000 + $4,500
Cost of Goods available for Sale = $5,500

Units Sold = 350 Units
Cost of Goods Sold = (200 Units * $5) + (100 Units * $10) + (50 Units * $15)
Cost of Goods Sold = $1,000 + $1,000 + $750
Cost of Goods Sold = $2,750

Cost of Ending Inventory = $5,500 - $2,750
Cost of Ending Inventory = $2,750