Question

ABC Company purchases five products for sale in the order and at the costs shown:

Unit Cost per Unit
1 $10
2 $12
3 $15
4 $18
5 $13
Assume ABC sells two items and uses the FIFO method of inventory valuation. What amount would appear in ending inventory on the balance sheet?
a. $46
b. $22
c. $45
d. $31

Answer 1

The amount that would appear in ending inventory on the balance sheet using the FIFO method is $35.

Step-by-step explanation:

The amount that would appear in ending inventory on the balance sheet can be calculated using the FIFO method. FIFO stands for First In, First Out, which means that the items that were purchased first are assumed to be sold first. In this case, ABC Company sells two items, so the ending inventory would include the remaining three items.

1. The first item purchased at a cost of $10 will remain in the inventory.
2. The second item purchased at a cost of $12 will also remain in the inventory.
3. The third item purchased at a cost of $15 will be sold.
4. The fourth item purchased at a cost of $18 will be sold.
5. The fifth item purchased at a cost of $13 will remain in the inventory.

Now, to calculate the amount in ending inventory, add up the costs of the remaining items: $10 + $12 + $13 = $35. Therefore, the amount that would appear in ending inventory on the balance sheet is $35.