Vargas Company uses the perpetual inventory method.Vargas purchased 400 units of inventory that cost $15.00 each.At a later date the company purchased an additional 800 units of inventory that cost $18.00 each.Vargas sold 500 units of inventory for $27.00.If Vargas uses a FIFO cost flow method,the amount of cost of goods sold appearing on the income statement will be:
A)$7,800.
B)$6,000.
C)$4,500.
D)$5,700.

Question

Quizplus · Accepted Answer

FIFO (first-in, first-out) cost flow method assumes that the first units purchased are the first units sold. Therefore, the cost of goods sold for the 500 units sold would be the cost of the first 400 units purchased, which is $15.00 each, totaling $6,000.

Vargas Company Uses the Perpetual Inventory Method