Tetra Co.uses the perpetual inventory system and a FIFO cost flow method.On January 1,the company purchased 2,000 units of inventory that cost $4.00 each.On January 12,the company purchased an additional 3,000 units of inventory at a cost of $4.20 each.On January 20,Tetra Company sold 4,000 units of inventory.Which of the following entries would be required to recognize the cost of goods sold on that date?

Question

Quizplus · Accepted Answer

The first-in,first-out (FIFO)cost flow method requires that the cost of the items purchased first be assigned to cost of goods sold.
Cost of goods sold = (2,000 × $4.00)+ (2,000 × $4.20)= $16,400
The journal entry to recognize cost of goods sold is a debit (increase)to cost of goods sold and a credit (decrease)to inventory.

Tetra CoUses the Perpetual Inventory System and a FIFO Cost Flow