Free Solved Salmone Company reported the following purchases and sales of its only product. Salmone uses a periodic inventory system. Determine the cost assigned to the ending inventory using FIFO.


Screenshot 2024 01 11 184212

Screenshot 2024 01 11 184212

Step 1 of 2

In the question, the purchases and sales of company is given and the periodic inventory system is used by the company. The opening stock is given for $1,820, various purchases and sales transactions is also given. Based on the report of purchases and sales, cost assigned to ending inventory using FIFO method, is to be determined.

FIFO stands for First In, First Out, and it is a method of asset management and valuation where the assets that are produced or acquired first are sold, used, or disposed of first.

The cost of goods sold (COGS) on the income statement is assumed to include the assets with the oldest costs for tax purposes under the FIFO method. The assets in inventory that are still in stock correspond to the ones that were produced or acquired most recently.

Explanation:

The report of purchases and sales are given and based on the given report regarding transactions, using FIFO method, cost assigned to the ending inventory is to be determined.

 

Step 2 of 2

In order to find the ending inventory, firstly determine the total units available for sale –

Total unit available for sale =(Beginning inventory+purchase on 5 may+purchase on 15 may)

Total unit available for sale = 182+252+132

Total unit available for sale =566units

Sold unit=172unit+122unit

Sold unit = 294units

The total available unit for sale was 566 units and sold unit was 294 units, so ending inventory unit would be

Ending inventory unit =Total unit available for sale−sold unit

Ending inventory unit =566−294

Ending inventory unit = 272unit

Using FIFO ( first in first out) method –

Ending inventory using FIFO method =(132×13)+(140×12)

Ending inventory using FIFO method =$1,716+$1,680

Ending inventory using FIFO method =$3,396

Explanation:

Ending inventory is determined by firstly determine the available inventory then subtract the sold unit. then by using the FIFO method that stats for first in first out, ending inventory is determined.

 

Final solution

So the correct answer is option A that is $3,396.

 

 

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