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 $500, two were purchased on july 9 for $550 each, and two were purchased on september 23 for $600 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:

Answer 1

The cost of goods sold for the year is $500.

Since FIFO method is to be used, the cost of goods sold for the year should be the cost of its first purchase regardless of when the product is actually bought. Thus, the cost of goods sold for the year is $500 ($500 × 1).