Question

Teacups Galore utilizes a perpetual inventory system and reported the following transactions for item TCG46:

May 1 Inventory Balance: 306 units at $5 each
May 5 Sold 132 units at $10 each
May 10 Purchased 150 units at $6 each
May 27 Sold 160 units at $10 each
Calculate the ending balance in inventory on May 31 using the first-in, first out (FIFO) method.

Answer 1

The ending balance in inventory for item TCG46 on May 31, calculated using the FIFO method, is 136 units at $6 each, totaling $816.

Step-by-step explanation:

To calculate the ending balance in inventory on May 31 using the first-in, first out (FIFO) method for item TCG46 at Teacups Galore, which operates a perpetual inventory system, we need to track the inventory through the transactions provided.

Here are the steps to calculate the ending balance:

1. Start with the opening balance of 306 units at $5 each.
2. When 132 units are sold on May 5, the remaining inventory is 306 - 132 = 174 units at $5.
3. On May 10, 150 units are purchased at $6 each, added to the existing inventory of 174 units at $5 each, totalling 324 units.
4. Upon the sale of 160 units on May 27, we first sell off the remaining 174 units at $5 from the initial stock and then 160 - 174 = -14 units (which means 14 of the units sold are from the new stock of units priced at $6).
5. The final inventory would be the balance of the units purchased on May 10, which is 150 - 14 = 136 units at $6 each.

So, the ending inventory balance for item TCG46 on May 31 will be 136 units at $6 each, totaling $816.