Question

A company purchased 80 units for $30 each on January 31. It purchased 160 units for $35 each on February 28. It sold 160 units for $50 each from March 1 through December 31. If the company uses the first−​in, first−out inventory costing​ method, what is the amount of Cost of Goods Sold on the income statement for the year ending December​ 31? (Assume that the company uses a perpetual inventory​ system.)

Answer 1

The Cost of Goods Sold (COGS) for the year ending December 31 using the first-in, first-out (FIFO) inventory costing method would be $8,000.

Step-by-step explanation:

To calculate the Cost of Goods Sold (COGS) using the first-in, first-out (FIFO) inventory costing method, we need to determine the cost of the units sold. Since the company uses a perpetual inventory system, we can calculate the cost of the 160 units sold based on the purchase dates and prices:

January 31: 80 units purchased at $30 each = $2,400

February 28: 80 units purchased at $35 each = $2,800

From March 1 to December 31: 160 units sold at $50 each = $8,000

Using FIFO, we start by matching the units sold with the oldest purchased units. Therefore, the COGS would be $2,400 (80 units purchased on January 31 at $30 each) plus $5,600 (80 units purchased on February 28 at $35 each).

The total COGS for the year ending December 31 would be $8,000.