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Knowledge Check 01 The inventory transactions of VTS Corporation are shown below. Date Transaction Number of...

Knowledge Check 01
The inventory transactions of VTS Corporation are shown below.

Date Transaction Number of Units Unit Cost/Price
Jan. 1 Beginning inventory 500 $ 10
Feb. 25 Sale 300 20
May 21 Purchase 400 12
Jul. 15 Purchase 500 15
Dec. 10 Sale 800 20


All purchase/sale transactions are made on credit. The company uses the FIFO method and the perpetual inventory system to record transactions. The entry to record the transaction on December 10 will involve a debit to Cost of Goods Sold for _____.

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Answer #1

Under FIFO method goods purchased first are sold first.

Therefore sale of Feb 25 will be made from beginning inventory @ $10 per unit for 300 units and sale of Dec 10 will be made from 200 units from beginning inventory 10 as the remaining balance of beginning inventory is 200 units , 400 units from purchase made on May 21 @12 and remaining 200 units from purchase made on July 15 @ 15.

Therefore cost of goods sold for Dec 10 will be

= 200*10 + 400*12 + 200*15

= 2,000 + 4,800 + 3,000

= $9,800.

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