Question

Anton Co. uses the perpetual inventory method. Anton purchased 600 units of inventory that cost $7 each. At a later date the company purchased an additional 750 units of inventory that cost $9 each. If Anton uses the FIFO cost flow method and sells 950 units of inventory, the amount of cost of goods sold will be:

A) $8,550

B) $6,650

C) $8,500

D) $7,350

Answer 1

Ans.	Option D    $7,350
	Purchase				Cost of goods sold			Balance
	Transaction	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	Purchase 1	600	$7	$4,200				600	$7	$4,200
	Purchase 2	750	$9	$6,750				600	$7	$4,200
								750	$9	$6,750
	Sales				600	$7	$4,200
					350	$9	$3,150	400	$9	$3,600
	Total				Cost of goods sold		$7,350	Ending inventory		$3,600
	*In FIFO method the units that have purchased first, are released the first one and ending inventory units
	remain from the last purchase.
	So, the Cost of goods sold is $7,350.