Samson Company had the following balances and transactions during 2013. What would the company's Cost of goods sold be on the December 31, 2013 income statement if the perpetual First-In, First-Out costing method is used? (Answers are rounded to the nearest dollar.)

Question

Samson Company had the following balances and transactions during 2013.  What would the company's Cost of goods sold be on the December 31, 2013 income statement if the perpetual First-In, First-Out costing method is used? (Answers are rounded to the nearest dollar.)

Quizplus · Accepted Answer

To calculate the Cost of Goods Sold using the perpetual FIFO method, we need to start by determining the cost of the inventory that was sold during the year.

Beginning inventory: 100 units at $10 = $1,000 
Purchase on February 10: 200 units at $12 = $2,400 
Purchase on June 11: 150 units at $14 = $2,100 
Purchase on October 6: 100 units at $15 = $1,500

Total units available for sale = 550 units 
Cost of goods available for sale = $7,000

To determine the cost of goods sold, we need to determine the cost of the inventory that was sold. Since this is done on a perpetual basis, we can look at the individual transactions:

- Sale on May 15: 80 units sold from the February 10 purchase, at a cost of $12 per unit (100 units were available, so FIFO assumes the first 80 were from February) = $960 
- Sale on August 9: 150 units sold from the June 11 purchase, at a cost of $14 per unit (150 units were available, so all of them were from June) = $2,100 
- Sale on December 20: 120 units sold from the October 6 purchase, at a cost of $15 per unit (100 units were available, so FIFO assumes the first 100 were from October, and the remaining 20 were from the June 11 purchase) = $1,800

Total cost of goods sold = $4,860

Therefore, the answer is C) $1,740.

Samson Company Had the Following Balances and Transactions During 2013