City Bicycle City Bicycle , a cycling store has a beginning inventory of one bi-level touring bicycle 1, for which it paid $2,500.Suppose that during the period the store purchases bi-level touring bicycle 2 for $2,900 and bi-level touring bicycle 3 for $3,000, and that it sells one bicycle for $5,500.The three bicycles are physically identical; the store acquired them at different times as their acquisition costs changed, so only their costs differ.
Using the City Bicycle example, suppose the cycling store uses the FIFO cost-flow assumption.The cost of goods sold is _____, and the ending inventory is _____.

Question

Quizplus · Accepted Answer

Under the FIFO (First-In, First-Out) method, the cost of goods sold is based on the cost of the oldest inventory. Therefore, the cost of goods sold is $2,500 (the cost of the first bicycle). The ending inventory is the sum of the costs of the remaining bicycles: $2,900 + $3,000 = $5,900.

City Bicycle City Bicycle , a Cycling Store Has a Beginning