Question

Beginning inventory, purchases, and sales for an inventory item are as follows:

Sep. 1	Beginning Inventory	25 units	$16
5	Sale	14 units
17	Purchase	27 units	$18
30	Sale	27 units

Assuming a perpetual inventory system and the first-in, first-out method, determine (a) the cost of the goods sold for the September 30 sale and (b) the inventory on September 30.

a. Cost of goods sold	$
b. Inventory, October 31	$

Answer 1

Answer : In first-in, first-out method, the inventory which is purchased first is sold out first.

Date	Purchases	Sales	Balance
Sep 1			25 units @ $16 per unit
Sep 5		14 units @ $16 per unit	11 units @ $16 per unit
Sep 17	27 units @ $18 per unit		11 units @ $16 per unit (+) 27 units @ $18 per unit
Sep 30		11 units @ $16 per unit (+) 16 units @ $18 per unit ( total 27 units sold )	11 units @ $18 per unit

a. Cost of goods sold for the September 30 sale [ ( 11 units * $16 ) + ( 16 units * $18 )	$464
b. Inventory on september 30 ( 11 units * $18 )	$198