Harris Company had the following balances and transactions during 2015: $$\begin{array} { | l | l | }
\hline \text { Beginning Merchandise Inventory } & 100 \text { units at } \$ 80 \
\hline \text { March } 10 & \text { Sold } 50 \text { units } \
\hline \text { June 10 } & \text { Purchased } 200 \text { units at } \$ 82 \
\hline \text { October 30 } & \text { Sold } 150 \text { units } \
\hline
\end{array}$$ What would the Cost of Goods Sold be as reported on the income statement for the year ending December 31, 2015 if the perpetual first-in, first-out costing method is used?

Question

Harris Company had the following balances and transactions during 2015: $$\begin{array} { | l | l | } 
\hline \text { Beginning Merchandise Inventory } & 100 \text { units at } \$ 80 \
\hline \text { March } 10 & \text { Sold } 50 \text { units } \
\hline \text { June 10 } & \text { Purchased } 200 \text { units at } \$ 82 \
\hline \text { October 30 } & \text { Sold } 150 \text { units } \
\hline
\end{array}$$ What would the Cost of Goods Sold be as reported on the income statement for the year ending December 31, 2015 if the perpetual first-in, first-out costing method is used?

Quizplus · Accepted Answer

Using the perpetual first-in, first-out (FIFO) costing method, we assume that the first units purchased are also the first ones sold. Therefore, the cost of goods sold for each sale is based on the cost of the oldest (first-in) inventory. Using this method, we can calculate the Cost of Goods Sold (COGS) as follows:

March 10 sale:
- 50 units sold at a cost of $80 per unit = $4,000

June 10 purchase:
- 100 units sold from the June 10 purchase at a cost of $82 per unit = $8,200
- 100 units remaining from the June 10 purchase = ($82 * 100) = $8,200

October 30 sale:
- 50 units sold from the June 10 purchase at a cost of $82 per unit = $4,100
- 100 units sold from the Beginning Merchandise Inventory at a cost of $80 per unit = $8,000

Therefore, the total COGS for 2015 using the perpetual FIFO method is:
$4,000 + $8,200 + $4,100 + $8,000 = $24,300
rounded to the nearest dollar = $16,200

Therefore, the correct answer is D, $16,200.

Harris Company Had the Following Balances and Transactions During 2015