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

To calculate the cost of goods sold under the FIFO method, we assume that the first units purchased are the first ones sold.

The inventory and cost of goods table would look like this:

| Date   | Transaction | Quantity | Cost/Unit | Total Cost |
|--------|-------------|----------|-----------|------------|
| July 2 | Purchase    | 200      | €3        | €600        |
| July 5 | Purchase    | 100      | €3.5      | €350        |
| July 7 | Sale        | 150      |           |             |
| July 11| Purchase    | 50       | €4        | €200        |
| July 13| Sale        | 100      |           |             |
| July 19| Sale        | 130      |           |             |
| July 22| Sale        | 60       |           |             |
| July 28| Purchase    | 120      | €4.5      | €540        |
| July 31| Sale        | 40       |           |             |

For the July 13 sale, the cost of goods sold would be calculated as follows:

- The first 100 units sold would come from the July 2 purchase at €3 each, for a total cost of €300.
- The remaining 50 units sold would come from the July 5 purchase at €3.5 each, for a total cost of €175.
- The total cost of goods sold for this sale is €475.

For the July 22 sale, the cost of goods sold would be calculated as follows:

- The first 60 units sold would come from the July 2 purchase at €3 each, for a total cost of €180.
- The remaining 90 units sold would come from the July 11 purchase at €4 each, for a total cost of €360.
- The total cost of goods sold for this sale is €540.

Therefore, the answer is C) 915 390.

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