Question

Priscilla has the following inventory information.

July 1 Beginning Inventory 20 units at $19 $380
7 Purchases 70 units at $20 1,400
22 Purchases 10 units at $23 230
$2,010
A physical count of merchandise inventory on July 31 reveals that there are 30 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for July is
a) $1,430.
b) $1,380.
c) $1,390.
d) $1,407.

Answer 1

The correct answer is found to be

a) $1,430.

Step-by-step explanation:

• To calculate FIFO (First-In, First Out) determine the cost of your oldest inventory and multiply that cost by the amount of inventory sold,

• According to the LIFO method, the last inventory given should be the first one out. Which means, the units purchased at the 22nd should be the one to be first sold, also followed by the ones purchased at the 7th and by the beginning inventory on July 1st.

• The number of units sold during July is:

• n = 20 ₊ 70 ₊ 10₋30

• n = 70 units

• Using LIFO, the amount allocated to those goods should come from 10 units at $23 and 60 units at $20:

• = 10 × $23 ₊ 60 × $20
• = 1,430.

• Therefore, the amount found to cost of goods sold for July is $1,430.