During July, the following purchases and sales were made by Phast Company. There was no beginning inventory. Phast 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 Phast Company. There was no beginning inventory. Phast 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 for each sale is calculated based on the assumption that the first items purchased are the first items sold.
July 13: Phast Company sold 10 units at $100 each. The first purchase on July 10 included 5 units at $70 each and the second purchase on July 17 included 5 units at $80 each. Under FIFO, the cost of goods sold for July 13 is calculated as: 
5 units x $70 (cost of the first purchase) + 5 units x $80 (cost of the second purchase) = $350 + $400 = $750. Therefore, the correct answer is $750.
July 22: Phast Company sold 6 units at $90 each. Under FIFO, the cost of goods sold for July 22 is calculated as: 
The remaining 4 units from the second purchase on July 17, which have a cost of $80 each, and 2 units from the third purchase on July 26, which have a cost of $100 each. The cost of goods sold for July 22 is therefore: 
4 units x $80 + 2 units x $100 = $320. Therefore, the correct answer is $320. 
Therefore, the best choice is B.

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