Use this information to answer the following question. A periodic inventory system is used.
Using the specific identification method and assuming that 50 of the items left are from the February 13 purchase and the rest are from the February 20 purchase,the cost assigned to ending inventory is
A) $1,920.
B) $1,656.
C) $1,686.
D) $1,588.

Question

Use this information to answer the following question.  A periodic inventory system is used.
Using the specific identification method and assuming that 50 of the items left are from the February 13 purchase and the rest are from the February 20 purchase,the cost assigned to ending inventory is
A) $1,920. 
B) $1,656. 
C) $1,686. 
D) $1,588.

Quizplus · Accepted Answer

Using the specific identification method, we can determine that the cost of the 50 items from the February 13 purchase is $9 each, since 50 x $9 = $450.

For the remaining items, we know that 200 were purchased on February 20 at a cost of $8 each, and 50 were sold (leaving 150). Thus, the cost of the 150 remaining items from the February 20 purchase is 150 x $8 = $1200.

Adding this to the cost of the 50 items from February 13 ($450), we get a total cost of $1650 for the ending inventory.

However, we must also include the $36 of freight costs that were incurred on the February 20 purchase. Thus, the final cost assigned to the ending inventory is $1650 + $36 = $1686. Therefore, the best choice is C.

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