Question

The inventory data for an item for September are: Sep. 1 Inventory 20 units at $20 4 Sold 10 units 10 Purchased 30 units at $25 17 Sold 20 units 30 Purchased 10 units at $30 17. Using the perpetual system, costing by the first-in, first-out method, what is the cost of the merchandise inventory of 30 units on September 30?

a. $800
b. $650
c. $750
d. $700

Answer 1

$800

Step-by-step explanation:

Under the FIFO system , inventories are priced using the price of the oldest batch in the stock, after which the price of the next oldest batch and this is done in turn. It is based on the principle that the first batch that arrives the store should be issued first.

So we can work the cost of the closing balance in this question using the table below

Date Description Qty unit ($) Value

Sept 1 Bal b/f 20 × 20 = 400

4 Sales ( 10) × 20 200

10 200

10 Purchase 30 × 25 = 750

40 950

17 Sales ( 20) Wk 1 = ( 450)

20 500

30 Purchases 10 × 30. = 300

Closing inventory 30 800

Notes / Working

1. The 20 units sold on September 17 will be valued as follows:

10 units × $20 = $200

20 units × $25 = $250

30 $ 450

The Cost of the merchandise inventory of 30 units on September 30 =

$800