Question

Samson Company had the following balances and transactions during 2015.

January 1 Beginning inventory: 20 units at $70 each
March 10 Purchased 10 units at $80 each
June 10 Sold 23 units for $100 each
What would Samson Company's inventory amount be on December 31, 2015 if the FIFO method was used?
A) $490
B) $510
C) $525
D) $560

Answer 1

Using the FIFO method, after selling 23 units, Samson Company's inventory on December 31, 2015, would consist of 7 units left from the March purchase, totaling $560.

Step-by-step explanation:

To determine the inventory amount for Samson Company on December 31, 2015, using the FIFO (First In, First Out) method, we need to track the inventory bought and sold throughout the year. Initially, there were 20 units at $70. In March, 10 units were purchased at $80 each. Under FIFO, the first items sold are the first items that were bought, so the 23 units sold in June would come from the beginning inventory and part of the March inventory.

Specifically, all 20 units from January at $70 each would be sold, and 3 units from the March purchase at $80 each would also be sold, leaving 7 units from the March purchase. The inventory amount at the end of the year would be 7 units at $80 each, which totals to 7 units x $80 = $560. The correct answer is D) $560.