Kip started a wholesale store this year selling bulk peanut butter. In January of this year, Kip purchased an initial five tubs of peanut butter for a total cost of $5,000. In July, Kip purchased three tubs for a total cost of $6,000. Finally, in November Kip bought two tubs for a total cost of $1,000. Kip sold six tubs by year-end. What is Kip's ending inventory under the FIFO cost-flow method?
A)$12,000
B)$6,000
C)$5,000
D)$2,500
E)$1,000

Question

Quizplus · Accepted Answer

FIFO cost-flow method assumes that the first goods purchased are the first goods sold. Therefore, Kip's ending inventory is composed of the most recent purchases: 2 tubs purchased in November for a total cost of $1,000. Thus, the ending inventory under the FIFO cost-flow method is $5,000 (the cost of the remaining 5 tubs purchased in January and July).

Kip Started a Wholesale Store This Year Selling Bulk Peanut