Biscuit Bakery had the following activity in its inventory account during August 20X3. $\begin{array}{lllcc}
\text { Date } & \text { Activity } & \text { Units } & \begin{array}{c}
\text { Cost per } \
\text { Unit Cost }
\end{array} & \text { Total } \
\hline \text { August 1 } & \text { Beginning inventory } & 100 & \$ 3.00 & \$ 300 \
\text { August 3 } & \text { Purchase } & 40 & 3.10 & 124 \
\text { August 7 } & \text { Sale } & 50 & & \
\text { August 12 } & \text { Purchase } & 50 & 3.20 & 160 \
\text { August 16 } & \text { Sale } & 70 & & \
\text { August 23 } & \text { Sale } & 40 & & \
\text { August 30 } & \text { Purchase } & 60 & 3.30 & 198
\end{array}$ What is the cost of goods sold for the month ended August 31,20X3,for Biscuit Bakery if the company uses periodic FIFO as its inventory valuation method?
A)$424.00
B)$485.00
C)$488.00
D)$500.00
E)$584.00

Question

Quizplus · Accepted Answer

Using periodic FIFO, we assume that the first units purchased are the first ones sold. Thus, the cost of goods sold for the month ended August 31, 20X3, can be calculated as follows:
- First, we sell the beginning inventory of 100 units at a cost of $3.00 per unit, which equals $300.
- Then, we sell 50 units from the purchase on August 3 at a cost of $3.10 per unit, which equals $155 (50 units x $3.10 per unit).
- After that, we sell 20 units from the purchase on August 12 at a cost of $3.20 per unit, which equals $64 (20 units x $3.20 per unit).
- Finally, we sell 40 units from the purchase on August 30 at a cost of $3.30 per unit, which equals $132 (40 units x $3.30 per unit).
- The total cost of goods sold equals the sum of these amounts: $300 + $155 + $64 + $132 = $651.
- However, we need to adjust for the ending inventory, which is the last purchase on August 30 of 60 units at a cost of $3.30 per unit, which equals $198.
- Therefore, the cost of goods sold for the month ended August 31, 20X3, equals $651 - $198 = $453.
- The closest answer to this amount is C: $488.00.

Biscuit Bakery Had the Following Activity in Its Inventory Account