Graham Company uses a periodic inventory system.Details for the inventory account for the month of January, 2011 are as follows: An end of the month (1/31/11) inventory showed that 180 units were on hand.If the company uses FIFO, what is the value of the ending inventory?

Question

Graham Company uses a periodic inventory system.Details for the inventory account for the month of January, 2011 are as follows:  An end of the month (1/31/11) inventory showed that 180 units were on hand.If the company uses FIFO, what is the value of the ending inventory?

Quizplus · Accepted Answer

To calculate the value of ending inventory using FIFO, we need to assume that the first units purchased or produced are the first ones sold, and the ending inventory consists of the most recent purchases or production. Therefore, we need to use the cost of the most recent purchases or production to calculate the value of ending inventory.

The total cost of units purchased or produced in January (100+120+150+180) is $2,190. If we assume that the cost of units purchased or produced on January 30 and 31 (180+150=$330) is the cost of ending inventory, then the value of ending inventory is:

180 units x $1.83 = $329.40

Therefore, the best choice is C: $984.

Graham Company Uses a Periodic Inventory System