Gordon Company has the following data available: If Gordon Company uses a perpetual FIFO inventory system,the cost of ending inventory on December 31 is ________.
A)$1,500
B)$700
C)$750
D)$500

Question

Gordon Company has the following data available:  If Gordon Company uses a perpetual FIFO inventory system,the cost of ending inventory on December 31 is ________.
A)$1,500 
B)$700 
C)$750 
D)$500

Quizplus · Accepted Answer

To calculate the cost of ending inventory using the FIFO method, we assume that the first items purchased are the first items sold. Therefore, the cost of the ending inventory will be based on the cost of the most recent items purchased.

Using the perpetual FIFO method, the cost of goods sold for December would be calculated as follows:

Cost of goods sold = (10 units x $100) + (15 units x $80) = $1,700

To calculate the cost of ending inventory, we need to determine the cost of the remaining units.

There were 10 units remaining in inventory from the December 15 purchase, which cost $100 each, for a total cost of $1,000.

There were 5 units remaining in inventory from the December 28 purchase, which cost $75 each, for a total cost of $375.

So the total cost of ending inventory on December 31 would be $1,375.

Therefore, the correct answer is C) $750.

Gordon Company Has the Following Data Available: If Gordon