Question

Assume Smart Touch Learning had 2 tablets in its beginning inventory, each with a cost of $300. On January 5, Smart Touch Learning purchased 5 tablets at a cost of $310 each. On January 15, Smart Touch learning sold 3 tablets to a customer. If the company is using the FIFO method, then the cost of goods sold on January 15 under a perpetual inventory system would be $910.

A. True
B. False

Answer 1

Under the FIFO method, the cost of goods sold for Smart Touch Learning on January 15 would be the cost of 2 tablets at $300 each from the beginning inventory, plus the cost of 1 tablet at $310 from the January 5 purchase, totaling $910. Thus, the statement is True.

Step-by-step explanation:

If Smart Touch Learning is using the FIFO (First In, First Out) method under a perpetual inventory system, we need to look at the tablets in the order they were acquired. The first tablets to be sold would be the ones from the beginning inventory. Therefore, the cost of goods sold (COGS) on January 15 for 3 tablets would be calculated as follows:

• 2 tablets at $300 each = $600 (from beginning inventory)
• 1 tablet at $310 each = $310 (from January 5 purchase)

Adding these amounts gives us a total COGS of $600 + $310 = $910.

Therefore, the statement that the COGS on January 15 is $910 is True.