Question

(MATH) Delta Diamonds had 5 diamonds available for sale this year: 1 purchased June 1 for $500, 2 purchased July 9 for $550 each, and 2 purchased September 23 for $600 each. On December 24, it sold 1 of the diamonds. Using FIFO, its Inventory at December 31 is ______.

Answer 1

Using the FIFO method, after one diamond was sold, the remaining Inventory at December 31 for Delta Diamonds is $2,300, consisting of 2 diamonds bought at $550 each and 2 at $600 each.

Step-by-step explanation:

Delta Diamonds had a total of 5 diamonds available for sale this year with varying costs of acquisition. When one diamond is sold on December 24, using the First-In, First-Out (FIFO) inventory costing method, the first diamond purchased is considered the one sold. Thus, the 1 diamond purchased on June 1 for $500 is removed from the inventory for the sale. The remaining inventory then consists of the 2 diamonds bought on July 9 for $550 each, and the 2 diamonds bought on September 23 for $600 each, totaling 4 diamonds.

To calculate the Inventory at December 31 using FIFO, we take the sum of the cost of the remaining diamonds as follows:

• 2 diamonds at $550 each = $550 * 2 = $1,100
• 2 diamonds at $600 each = $600 * 2 = $1,200

Therefore the total Inventory at December 31 is $1,100 + $1,200 = $2,300.