A company had inventory on November 1 of 5 units at a cost of $20 each. On November 2, they purchased 10 units at $22 each. On November 6, they purchased 6 units at $25 each. On November 8, 8 units were sold for $55 each. Using the FIFO perpetual inventory method, what was the value of the inventory on November 8 after the sale?
A)$304
B)$296
C)$288
D)$280
E)$276

Question

Quizplus · Accepted Answer

FIFO (First-In, First-Out) method assumes that the first units purchased are the first units sold. Therefore, the 5 units on hand on November 1 are assumed to be sold first, followed by the 10 units purchased on November 2, and then the 6 units purchased on November 6. The cost of the 8 units sold is calculated as follows:5 units x $20 = $10010 units x $22 = $2203 units x $25 = $75Total cost of 8 units sold = $395The value of the inventory on November 8 after the sale is calculated as follows:Beginning inventory (5 units x $20) = $100Purchases (10 units x $22) = $220Purchases (6 units x $25) = $150Total cost of goods available for sale = $470Cost of goods sold (8 units x $395) = $395Ending inventory = $470 - $395 = $75

A Company Had Inventory on November 1 of 5 Units