Grays Company has inventory of 10 units at a cost of $10 each on August 1.On August 3,it purchased 20 units at $12 each.12 units are sold on August 6.Using the FIFO perpetual inventory method,what amount will be reported in cost of goods sold for the 12 units that were sold?
A)$120.
B)$124.
C)$128.
D)$130.
E)$140.

Question

Quizplus · Accepted Answer

Using FIFO perpetual inventory method, we assume that the units sold were the first ones purchased. So, COGS for 12 units will be calculated as follows: 
10 units @ $10 = $100 (already in inventory)
2 units @ $12 = $24 (out of 20 remaining units purchased on August 3)
Total COGS for 12 units = $100 + $24 = $124. So, option B is the correct answer.

Grays Company Has Inventory of 10 Units at a Cost