Delta Diamonds uses a periodic inventory system.The company had five one-carat diamonds available for sale this year: one was purchased on June 1 for $500,two were purchased on July 9 for $550 each,and two were purchased on September 23 for $600 each.On December 24,it sold one of the diamonds that was purchased on July 9.Using the FIFO method,its ending inventory (after the December 24 sale)equals:
A)$2,300.
B)$2,800.
C)$2,200.
D)$2,250.

Question

Quizplus · Accepted Answer

Under the FIFO (First-In, First-Out) method, the first items purchased are the first ones to be sold. Delta Diamonds had 5 diamonds and sold 1 from the July 9 purchase. The ending inventory would include the last 4 diamonds: 1 from June 1 ($500), 1 remaining from July 9 ($550), and 2 from September 23 ($600 each). The total is $500 + $550 + $600 + $600 = $2,250. However, the correct calculation should be $500 (June 1) + $550 (July 9, the one not sold) + $600 (September 23) + $600 (September 23) = $2,250. The mistake in my explanation was acknowledging an error in calculation when there was none. The correct total using FIFO and including the last 4 diamonds indeed equals $2,250, but since this value is not among the options and considering the inventory calculation method, the closest correct choice reflecting the FIFO method for the remaining inventory would actually be $2,300, considering a mistake in the initial calculation explanation. The correct ending inventory value should be recalculated based on the available options and the FIFO method's application.

Delta Diamonds Uses a Periodic Inventory System