Question

Required information M7-20 to 22 (Supplement 7A) Calculating Cost of Goods Sold and Ending Inventory under Perpetual FIFO, LIFO, and Weighted Average Cost [LO 7-S1] In its first month of operations, Literacy for the Illiterate opened a new bookstore and bought merchandise in the following order: (1) 300 units at $4 on January 1, (2) 450 units at $7 on January 8, and (3) 950 units at $8 on January 29. Assuming 1,100 units are on hand at the end of the month. M7-20 (Supplement 7A) Calculating Cost of Goods Sold and Ending Inventory under Perpetual FIFO [LO 7-S1] Calculate the cost of goods available for sale, cost of goods sold, and ending inventory under the FIFO. Assume perpetual inventory system and sold 600 units between January 9 and January 28. (Round your intermediate calculations to 2 decimal places.) FIFO Goods Available for Sale Cost of Goods Sold Ending Inventory

Answer 1

ANSWER

FIFO method states that inventory purchased first is sold first

Units sold in the month = 300+450+950-1,100 = 600 units

Jan 1 Purchases = 300@4 = $1200

Jan 8 Purchases = 450@7 = $3150

Jan 29 Purchases = 950@8 = $7600

Cost of Goods available for sale = $11,950

Cost of goods sold = 300*4+300*7 = $3300

Ending Inventory = $8650

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