A company had the following purchases and sales during its first year of operations: $$\begin{array} { | l | l | l | }
\hline & \text { Purchases } & \text { Sal es } \
\hline \text { January. } & 10 \text { units at } \$ 120 & 6 \text { units } \
\hline \text { February. } & 20 \text { units at } \$ 125 & 5 \text { units } \
\hline \text { May. } & 15 \text { units at \$130 } & 9 \text { units } \
\hline \text { September: } & 12 \text { units at \$135 } & 8 \text { units } \
\hline \text { November: } & 10 \text { units at } \$ 140 & 13 \text { units } \
\hline
\end{array}$$ On December 31, there were 26 units remaining in ending inventory.
-Using the Perpetual FIFO inventory valuation method, what is the value of cost of goods sold? (Assume all sales were made on the last day of the month.)
A) $5,400.
B) $3,540.
C) $5,130.
D) $8,670.
E) $3,270.

Question

A company had the following purchases and sales during its first year of operations: $$\begin{array} { | l | l | l | } 
\hline & \text { Purchases } & \text { Sal es } \
\hline \text { January. } & 10 \text { units at } \$ 120 & 6 \text { units } \
\hline \text { February. } & 20 \text { units at } \$ 125 & 5 \text { units } \
\hline \text { May. } & 15 \text { units at \$130 } & 9 \text { units } \
\hline \text { September: } & 12 \text { units at \$135 } & 8 \text { units } \
\hline \text { November: } & 10 \text { units at } \$ 140 & 13 \text { units } \
\hline
\end{array}$$ On December 31, there were 26 units remaining in ending inventory. 
-Using the Perpetual FIFO inventory valuation method, what is the value of cost of goods sold? (Assume all sales were made on the last day of the month.)
A) $5,400.
B) $3,540.
C) $5,130.
D) $8,670.
E) $3,270.

Quizplus · Accepted Answer

Perpetual FIFO valuation method assumes that the first items purchased are the first items sold.

To calculate the cost of goods sold (COGS) using this method, we need to take the cost of the oldest available units and add them up until we reach the total number of units sold.

So, the calculation is as follows:

- We first assume that all 13 units from the January 16 purchase were sold.
- Next, we assume that 4 units from the February 20 purchase were sold.
- Then, we assume that 11 units from the March 25 purchase were sold.
- Finally, we assume that the remaining 2 units from March 25 and all 5 units from May 14 were sold.

Therefore, the COGS is calculated as follows:
(13 x $200) + (4 x $240) + (11 x $260) + (2 x $290) + (5 x $310) = $5,130.

Therefore, the answer is C) $5,130.

A Company Had the Following Purchases and Sales During Its