Question

ABC company started its operations this year and began with no inventory on hand. It provided the following details of the purchases made during the month of January: Date Units Unit price 300 1-Jan 15-Jan 28-Jan 450 750 $7 $8 $9 The company uses FIFO method to value its inventory. At the end of the month, the ending inventory on hand is 900 units. Assuming the periodic inventory system, compute the cost of goods available for sale. (1450)​

Answer 1

Cost of goods available for sale is $ 7950

Explanation:

• Since FIFO method is used , the closing entry of 900 units consists of recent purchases.
• Most recent purchases are : 750 units out of latest purchase @ $9 and remaining 150 units would be priced out of second latest purchase @ $8.
• Therefore, the cost of closing inventory would be as follows:

         

                 750 units @ $9          =   $ 6750

                 150 units @ $8          =   $ 1200

                 Closing Inventory = $ 6750 + $ 1200 = $ 7950

We have to find:

Cost of goods available for sale

Cost of goods available for sale = value of Closing stock

So, Cost of goods available for sale is $ 7950