Question

Delta Diamonds uses a periodic inventory system. The company had five one-carat diamonds available for sale this year: one was purchased on June 1 for $1,150, two were purchased on July 9 for $1,350 each, and two were purchased on September 23 for $1,450 each. On December 24, it sold one of the diamonds that was purchased on July 9. Using the FIFO method, its cost of goods sold for the year ended is:

A) $2,700.

B) $1,450.

C) $2,900.

D) $1,150.

Answer 1

OPTION: $1150

EXPLANATION:

Under FIFO method, goods purchased first are assumed to be sold first in order to value cost of goods sold and cost of ending inventory.

Therefore,

cost of goods sold = cost of diamond purchased first

= cost of diamond purchased on June 1

= $1150