Question

Arrow Street Market utilizes a periodic inventory system. A physical count on December 31 found 67 units of item CR113 in inventory. The following transactions were reported for the year:

January 1 Inventory 50 units at $820 each
May 15 Purchase 250 units at $805 each
November 1 Purchase 100 units at $815 each
Calculate the ending inventory balance of item CR113 using the first-in, first-out (FIFO) method.

Answer 1

To calculate the ending inventory balance of item CR113 using the FIFO method, we assign the earliest costs to the units sold first. By tracking the order of inventory purchases and applying the FIFO method, the ending balance is $13,685.

Step-by-step explanation:

To calculate the ending inventory balance of item CR113 using the FIFO method, we need to track the order of the inventory purchases and assign the earliest costs to the units sold first. In this case, we have three purchases:

1. 
   
3. January 1: 50 units at $820 each
4. 
   
6. May 15: 250 units at $805 each
7. 
   
9. November 1: 100 units at $815 each

Given that the physical count on December 31 found 67 units in inventory, we can calculate the ending inventory balance using the FIFO method as follows:

1. 
   
3. Assign the 50 units from the January 1 purchase to the ending inventory.
4. 
   
6. Assign 17 units from the May 15 purchase to the ending inventory (67 - 50 = 17).
7. 
   
9. Calculate the cost of these units by multiplying the number of units by the purchase price: 17 units x $805 = $13,685.

Therefore, the ending inventory balance of item CR113 using the FIFO method is $13,685.