Eaton Electronics uses a periodic inventory system.On March 31, Eaton has two plasma TVs on hand at a cost of $1,500 each (serial numbers 11534892 and 11534894).In April, the company purchases four more identical TVs from Toshiba for $1,450 each (serial numbers 11542631 through 11542634).In May, the company purchases five more identical TVs for $1,600 each (serial numbers 11550964 through 11550968).In June, Eaton sells two of these TVs (serial numbers 11534894 and 11542631).There were no additional purchases or sales during the remainder of the year.
-Use the information above to answer the following question.Eaton Electronics reports $3,000 as the cost of goods sold.Eaton Electronics is using the:
A) specific identification method.
B) LIFO method.
C) FIFO method.
D) weighted average cost method.

Question

Quizplus · Accepted Answer

Since the cost of goods sold is $3,000 and two plasma TVs were sold, each costing $1,500, we know that the cost of one TV is $1,500. Therefore, the two TVs sold were the ones purchased first (the oldest inventory), leaving the remaining seven in stock. Using the FIFO method, the cost of goods sold is calculated by matching the cost of the oldest inventory (the two TVs sold) against the revenue earned from selling them. Therefore, the cost of goods sold would be $3,000, and the remaining inventory would have a total cost of $10,250 (($1,500 x 5) + ($1,450 x 2)).

Eaton Electronics Uses a Periodic Inventory System