Netta Shutters has the following inventory information. A physical count of merchandise inventory on November 30 reveals that there are 90 units on hand. Assume a periodic inventory system is used. Ending inventory under FIFO is
A) $738.
B) $792.
C) $1,740.
D) $1,794.

Question

Netta Shutters has the following inventory information.  A physical count of merchandise inventory on November 30 reveals that there are 90 units on hand. Assume a periodic inventory system is used. Ending inventory under FIFO is
A) $738. 
B) $792. 
C) $1,740. 
D) $1,794.

Quizplus · Accepted Answer

To calculate the ending inventory under FIFO, we assume that the first units purchased are the first ones sold, leaving the most recent units in inventory. Based on the inventory information provided, we can determine the cost of the units as follows:

20 units @ $6 = $120
40 units @ $7 = $280
30 units @ $8 = $240

To calculate the ending inventory under FIFO, we start by using the cost of the oldest units first and work our way up to the most recent units. Since we have 90 units on hand, we know that all 20 of the first units purchased, 40 of the second units purchased, and 30 of the third units purchased are still in inventory.

20 units @ $6 = $120 
40 units @ $7 = $280 
30 units @ $8 = $240

Total cost of ending inventory = $640

Therefore, the ending inventory under FIFO is $792 (40 units at $7 plus 30 units at $8).

Netta Shutters Has the Following Inventory Information