During July, the following purchases and sales were made by James Company. There was no beginning inventory. James Company uses a perpetual inventory system. Under the FIFO method, the cost of goods sold for each sale is: July 13 July 22

Question

During July, the following purchases and sales were made by James Company. There was no beginning inventory. James Company uses a perpetual inventory system.  Under the FIFO method, the cost of goods sold for each sale is: July 13 July 22

Quizplus · Accepted Answer

Under the FIFO method, the cost of goods sold is calculated by assuming that the first items purchased are the first items sold.

On July 13th, 200 units were sold. The cost of the 200 units can be calculated as follows:

100 units were purchased at €3.50 = €350
100 units were purchased at €4.00 = €400
Total cost of 200 units = €750

The cost of goods sold for July 13th is €750.

On July 22nd, 130 units were sold. The cost of the 130 units can be calculated as follows:

30 units from the July 5th purchase at €3.00 = €90
100 units from the July 16th purchase at €3.90 = €390
Total cost of 130 units = €480

The cost of goods sold for July 22nd is €480.

Therefore, the total cost of goods sold is €1,230 (€750 + €480), and choice C €915 and €390 is the correct answer.

During July, the Following Purchases and Sales Were Made by James