Question

A Calculate inventory amounts when costs are rising (LO6-3)

[The following information applies to the questions displayed below.]

During the year, TRC Corporation has the following inventory transactions. Date Transaction Number of Units Unit Cost Total Cost Jan. 1 Beginning inventory 58 $ 50 $ 2,900 Apr. 7 Purchase 138 52 7,176 Jul. 16 Purchase 208 55 11,440 Oct. 6 Purchase 118 56 6,608 522 $ 28,124 For the entire year, the company sells 444 units of inventory for $68 each. Exercise 6-4A Part 1 Required: 1. Using FIFO, calculate ending inventory, cost of goods sold, sales revenue, and gross profit.

Answer 1

Using FIFO to calculate inventory amounts when costs are rising:

Unit Unit Cost Total Cost

Jan. 1 Beginning inventory 58 $ 50 $ 2,900

Apr. 7 Purchase 138 52 7,176

Jul. 16 Purchase 208 55 11,440

Oct. 6 Purchase 118 56 6,608

522 $ 28,124

b) Less Cost of Sales 444 $ 23,756

a) Ending Inventory 78 56 $ 4,368

c) Sales 444 68 $30,192

Cost of Goods Sold 444 $23,756

d) Gross Profit $6,436

Step-by-step explanation:

FIFO is one of the methods for computing inventory. It is First in, First Out based on the concept that goods that were purchased first would be the first to be sold. When there are rising prices and goods are of perishable nature, it makes sense to sell the goods that were bought first.