Question

Ted's Sports Center purchased two basketballs for resale. One was purchased in June at a cost of $30 and the other was purchased in July at a cost of $34. The two inventory items are identical in all respects, except the price paid to acquire them. Assume Ted's uses the first-in, first-out (FIFO) cost flow method. If Ted's sells one of the balls in August, which of the following amounts would be charged to the Cost of Goods Sold account?

Answer 1

Using the FIFO method, the basketball purchased at $30 in June would be charged to the Cost of Goods Sold when one basketball is sold in August.

Step-by-step explanation:

According to the first-in, first-out (FIFO) cost flow method, when identical inventory items are purchased at different costs, the cost of the earliest purchased goods is charged to the Cost of Goods Sold (COGS) first. Ted's Sports Center purchased two basketballs for resale, one at $30 in June and another for $34 in July. If one basketball is sold in August and we apply the FIFO method, the basketball that was purchased first at $30 would be charged to the COGS account.