Baldwin Company had the following balances and transactions during 2019: $$\begin{array} { | l | l | }
\hline \text { Beginning Merchandise Inventory as of } & \
\text { January } 1,2019 & 125 \text { units at } \$ 82 \
\hline \text { March 10 } & \text { Sold } 80 \text { units } \
\hline \text { June } 10 & \text { Purchased } 250 \text { units at } \$ 86 \
\hline \text { October 30 } & \text { Sold 205 units } \
\hline
\end{array}$$ What would be reported as Cost of Goods Sold on the income statement for the year ending December 31,2019 if the perpetual inventory system and the first-in,first-out inventory costing method are used?

Question

Baldwin Company had the following balances and transactions during 2019: $$\begin{array} { | l | l | } 
\hline \text { Beginning Merchandise Inventory as of } & \
\text { January } 1,2019 & 125 \text { units at } \$ 82 \
\hline \text { March 10 } & \text { Sold } 80 \text { units } \
\hline \text { June } 10 & \text { Purchased } 250 \text { units at } \$ 86 \
\hline \text { October 30 } & \text { Sold 205 units } \
\hline
\end{array}$$ What would be reported as Cost of Goods Sold on the income statement for the year ending December 31,2019 if the perpetual inventory system and the first-in,first-out inventory costing method are used?

Quizplus · Accepted Answer

Using the FIFO (First-In, First-Out) method under a perpetual inventory system, we calculate the Cost of Goods Sold (COGS) by selling the oldest inventory first. 1. The first sale of 80 units would come from the beginning inventory of 125 units at $82 each. So, 80 units * $82 = $6,560.2. The second sale of 205 units would first use up the remaining 45 units from the beginning inventory (125 - 80 = 45 units) at $82 each, and then 160 units from the June 10 purchase. So, for the 45 units: 45 units * $82 = $3,690. For the 160 units from the June purchase: 160 units * $86 = $13,760.3. Adding these amounts together gives us the total COGS: $6,560 (from the first sale) + $3,690 (remaining units from the beginning inventory for the second sale) + $13,760 (units from the June purchase for the second sale) = $24,010.

Baldwin Company Had the Following Balances and Transactions During 2019