Question

A company has the following purchases and sales during February. Using the FIFO method, what is the cost of goods sold?

1) $500
2) $750
3) $1,000
4) $1,250

Answer 1

To calculate the cost of goods sold using FIFO method, we need to assume that the first items purchased are the first items sold. The cost of goods sold in this case is $1,250.

Step-by-step explanation:

To calculate the cost of goods sold using the FIFO method, we need to assume that the first items purchased are the first items sold. In this case, we have purchases of $500, $750, $1,000, and $1,250. To calculate the cost of goods sold, we start with the first purchase, which is $500. Then, we add the second purchase of $750. The total is now $500 + $750 = $1,250. Since this is greater than the sales value, we stop here and the cost of goods sold is $1,250.