Question

The Hat Store had the following series of transactions for 2016:

   

Date	Transaction	Description
Jan. 1	Beginning inventory	45 units @	$	20.00
Mar. 15	Purchased	220 units @	$	24.00
May 30	Sold	160 units @	$	39.50
Aug. 10	Purchased	245 units @	$	25.00
Nov. 20	Sold	340 units @	$	39.50

  

Required

Determine the quantity and dollar amount of inventory at the end of the year, assuming The Hat Store uses the FIFO cost flow assumption and keeps perpetual records. (Round your answers to 2 decimal places.)

Answer 1

Ending inventory=Beginning inventory+Purchases-Sales

=45+(220+245)-(160+340)=10 units.

Ending inventory as on May 30=105 units @$24 each(Note 1)

Hence ending inventory as on year end=10 units@$25 each of August 10 Purchases

=(10*25)=$250

NOTE 1:

As per FIFO;goods purchased first are sold off first.Hence ending inventory as on May 30 would consist of 105 units of March 15 purchases(since 160 units sold would consist of 45 units of beginning inventory and the rest(160-45)=115 units of March 15 purchases).

Hence the balance as on year end of 10 units would consist of August 10 purchases.(since sale as on Nov 20 would consist of 105 units of March 15 purchases and the balance (340-105)=235 units of August 10 purchases).