Question

Beginning inventory 10 units at $60 First purchase 25 units at $65 Second purchase 30 units at $68 Third purchase 15 units at $75 The firm uses the periodic system, and there are 25 units of the commodity on hand at the end of the year. What is the amount of inventory at the end of the year using the FIFO method?

Answer 1

Explanation: Periodic system : there are two methods to record inventory under LIFO, FIFO and weighted average method, perpetual and periodic. In periodic inventory method the accounts are revised once in a specific period,usually at the end,while in perpetual system it is done continuously.

Under FIFO method, the accounts are recorded at an assumption that the goods purchased first will also be sold first. Hence, the 25 units at the end of the period will be valued at recent purchase price, that is, $75.

(25 units)*($75) = $1875