Nichols, Inc. had the following balances and transactions during 2018: $$\begin{array} { | l | l | }
\hline \text { Beginning Merchandise Inventory as of January 1,2018 } & 300 \text { units at } \$ 80 \
\hline \text { March } 10 & \text { Sold } 80 \text { units } \
\hline \text { June } 10 & \text { Purchased } 600 \text { units at } \$ 85 \
\hline \text { October } 30 & \text { Sold } 380 \text { units } \
\hline
\end{array}$$ What would be reported for Ending Merchandise Inventory on the balance sheet at December 31, 2018 if the perpetual inventory system and the first-in, first-out inventory costing method are used?

Question

Nichols, Inc. had the following balances and transactions during 2018: $$\begin{array} { | l | l | } 
\hline \text { Beginning Merchandise Inventory as of January 1,2018 } & 300 \text { units at } \$ 80 \
\hline \text { March } 10 & \text { Sold } 80 \text { units } \
\hline \text { June } 10 & \text { Purchased } 600 \text { units at } \$ 85 \
\hline \text { October } 30 & \text { Sold } 380 \text { units } \
\hline
\end{array}$$ What would be reported for Ending Merchandise Inventory on the balance sheet at December 31, 2018 if the perpetual inventory system and the first-in, first-out inventory costing method are used?

Quizplus · Accepted Answer

Using the first-in, first-out (FIFO) inventory costing method, the cost of goods sold is calculated by assuming that the first goods purchased are the first goods sold. 
Therefore, we can calculate the cost of goods sold as: 
Beginning inventory + Purchases - Ending inventory = Cost of goods sold 
$19,600 + $166,400 - Ending inventory = $166,000 
Ending inventory = $19,600 + $166,400 - $166,000 = $20,000 
Thus, the ending merchandise inventory on the balance sheet at December 31, 2018 if the perpetual inventory system and the FIFO inventory costing method are used would be $20,000.

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