Question

a company had beginning inventory and purchased inventory items during the year as follows: beginning inventory: 100 units for $30; purchases: (1) 200 units for $32 (2) 150 units for $35. no items were sold. a physical inventory at year-end shows only 425 units on hand. the replacement cost at year-end is $40 per unit. assuming the company uses the fifo method, how much is the inventory shrinkage loss that should be recognized

Answer 1

ANSWER -

First, let's calculate the total cost of the beginning inventory:
100 units x $30 = $3,000

Next, let's calculate the cost of the first purchase:
200 units x $32 = $6,400

Next, let's calculate the cost of the second purchase:
150 units x $35 = $5,250

The total cost of all inventory purchases is:
$3,000 + $6,400 + $5,250 = $14,650

Next, let's calculate the total cost of the year-end inventory based on the FIFO method:
100 units x $30 = $3,000 (beginning inventory)
200 units x $32 = $6,400 (first purchase)
125 units x $35 = $4,375 (second purchase)