Question

TB EX Qu. 6-206 During 2021, a company sells... During 2021, a company sells 300 units of inventory for $92 each. The company has the following inventory purchase transactions for 2021 Date Transaction Jan. 1 Beginning inventory May 5 Purchase Nov. 3 Purchase Number of Units 66 169 100 415 Unit Cost 564 65 67 Total Cost $ 4,224 10,985 12,060 $27,269 Calculate ending inventory and cost of goods sold for 2021 assuming the company uses FIFO. Ending inventory Cost of goods sold

Answer 1

Based on the information available in the question, we can answer as follows:-

The company has sold 300 units of inventory during 2021. Out of the total number of units of 415, 300 units have been sold. Hence, the ending inventory with the company is 115 units. Under FIFO (First In ,First out) method, the goods that are bought in the beginning are sold first. As such, since 300 units of the product is sold, the remaining units of 115 units is calculated from the goods bought on November 3(since goods as part of beginning inventory and May 5 purchases would have been sold already)

Ending Inventory:-

115 units * $67 units = $7,705

Cost of Goods sold:-

The goods sold are from the beginning inventory and May 5 purchases.

Since 300 units are sold, 66 units would have been sold from January 1 inventory, 169 units would have been sold from May 5th inventory and the remaining 65 units from the November 3rd inventory.

As such,we can calculate the Cost of goods sold as follows:-

Particulars	No.of Units	Cost per unit	Amount
Beginning Inventory	66	64	4,224
May 5th	169	65	10,985
November 3rd	65	67	4,355
Cost of goods sold			19,564

Cost of Goods sold - $19,564

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