Question

23. JB Adams Inc. had the following purchase transactions in May

Date of Purchase	Number of Units	Cost per Unit	Total Cost
May 5	500	$4	$2,000
May 10	700	$6	$4,200
May 15	400	$4.50	1,800

Adams sells 1,200 units on May 20 and uses the FIFO method of inventory costing. What is Adams' Cost of Goods Sold?

Group of answer choices

a. 6,000

b. 4,800

c. 7,200

d. 6,200

24. JB Adams Inc. had the following purchase transactions in May

Date of Purchase	Number of Units	Cost per Unit	Total Cost
May 5	500	$4	$2,000
May 10	700	$6	$4,200
May 15	400	$4.50	1,800

Adams sells 500 units on May 20 and uses the Weighted Average method of inventory costing. What is Adams' Cost of Ending Inventory?

Group of answer choices

a. 6,000

b. 5,600

c. 2,500

d. 5,500

Answer 1

23. 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.

Cost of goods sold = (500 * $4) + (700 * $6)

= $2,000 + $4,200

= $6,200

The answer is Option d.

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24. Under the Weighted average method of inventory valuation both Cost of goods sold and Ending inventory are valued at average unit cost.

Weighted average cost per unit = Cost of units available for sale / Number of units available for sale

= ($2,000 + $4,200 + $1,800) / (500 + 700 + 400)

= $8,000 / 1,600

= $5

Units in ending inventory = (500 + 700 + 400) - 500

= 1,100

Ending inventory = 1,100 units * $5

= $5,500

The answer is Option d.