Question

ABC Company employs a periodic inventory system and sells its inventory to customers for $27 per unit. ABC Company had the following inventory information available for the month of May: May 1 May 8 May 13 May 18 May 21 May 28 May 30 Beginning inventory 2,400 units @ $14 cost per unit Sold 1,000 units Purchased 1,300 units @ $17 cost per unit Sold 1,200 units Purchased 1,100 units @ $11 cost per unit Sold 300 units Purchased 700 units @ $10 cost per unit During May, ABC Company reported operating expenses of $14,500 and had an income tax rate of 43%. Calculate the dollar amount of ending inventory shown on ABC's May 31 balance sheet using the FIFO method. Enter answer...

Answer 1

According to the requirement of the question, we have to calculate the amount of Ending Inventory using FIFO method.

Requirement:- Calculate the dollar amount of ending Inventory shown on ABC's May 31 balance sheet Using the FIFO method.

First of all, Meaning of FIFO - FIFO means First In - First Out, in simple words, the oldest inventory are sold first and the newest inventory is still in our stock.

Solution:-  $39,500 is the amount of Ending Inventory.

Working Note:- Calculation of Ending inventory Under FIFO method.

Units in ending inventory = Total units purchased - Total units sold

= 2,400 + 1,300 + 1,100 + 700 - 1,000 - 1,200 -300

= 3,000 units in ending inventory.

Under FIFO method, the oldest units are assumed to be sold and the newest units are assumed still in inventory.Thus, ending inventory under FIFO can be calculated as below:

1,200 units * $17 = $20,400

1,100 units * $11 = $12,100

700 units * $10 = $ 7,000

Total amount = $39,500

Thank you.

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