Question

The Laurel Corporation starts the year with a beginning inventory of 600 units at $5 per unit. The company purchases 1,000 units at $4 each in February and 400 units at $6 each in October. Laurel sells 300 units during the year. Laurel has a periodic inventory system and uses the FIFO inventory costing method. What is the amount of cost of goods sold?

A) $1,200

B) $1,868

C) $1,500

D) $1,800

Manufacturers have three types of inventory, which include raw materials, work in process, and finished goods, whereas merchandisers have only raw materials inventory.

True OR False

Goods placed in inventory are initially recorded at market value.

True

False

Answer 1

• Answer #1
  >As per FIFO, Units must have been sold from the earliest balance of inventory available at rate of that inventory.
  >Units sold = 300
  >Cost of Goods Sold = 300 units x $ 5 = $ 1500
  >Correct Answer = Option ‘C $ 1500
• Answer #2
  >FALSE
  >Manufacturers have 3 types: raw material, WIP and Finished Goods, whereas
  >Merchandisers ONLY HAVE Finished Goods Inventory
• Answer #3
  FALSE
  Goods placed in inventory are initially recorded at COST at which they are purchased.