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Sheridan Company uses a periodic inventory system. For October, when the company sold 600 units, the...

Sheridan Company uses a periodic inventory system. For October, when the company sold 600 units, the following information is available. Units Unit Cost Total Cost October 1 inventory 220 $18 $3,960 October 8 purchase 440 19 8,360 October 25 purchase 220 22 4,840 880 $17,160 Compute the October 31 inventory and the October cost of goods sold using the FIFO method. Ending inventory $ Cost of goods sold $

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Answer #1

Ending inventory units = Units available for sale - Unit sold

= 880 units - 600 units

= 280 units

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.

Ending inventory of 280 units consists of 220 units from October 25 purchases and 60 units from October 8 purchases.

Ending inventory = (220*$22) + (60*$19)

= $4,840 + $1,140

= $5,980

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