Question

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Pharoah Company has the following inventory data:

July 1		Beginning Inventory		50 units at $25		$1250
7		Purchases		174 units at $26		4524
22		Purchases		25 units at $27		675
						$6449

A physical count of merchandise inventory on July 30 reveals that there are 62 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for July is

$4812.

$4887.

$4688.

$4775.

Answer 1

Solution:

FIFO Stands for “First-In, First-Out” method. The FIFO method assumes that the oldest products in a company’s inventory have been sold first. The costs paid for those oldest products are the ones used in the calculation.

On July 30, 62 units are there in closing stock which means 50 units of opening stock and 137 units (See workings) of purchases made in the 7th of july has been sold as per FIFO.

Going by the FIFO method,

COGS calculation is as follows:
50 x $25 = $1250
137 x $26 =$3562
COGS Total: $4812

Working:

The rest of the goods that is (174-137) units = 37 units and the units purchased on 22 July that is = 25 units

The remaining unsold units: 62 units

Hence the amount allocated fir cost of good sold for July is $4812.

$4812 will be the answer.

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