ABC Co. uses a perpetual inventory system and uses the FIFO cost flow assumption. During the month, it had two sales. Calculate the dollar value of its cost of goods sold for the first sale made on Jan. 10. DateActivity Jan 1Beginning Inventory 8 @ $12 = $96Jan 5Purchase12 @ $15= $180Jan 25Purchase10 @ $18= $180Jan 10Sale11 @ $50 eachJan 30Sale3 @ $55 eachMultiple choice question.$195$141$550$180
Question
ABC Co. uses a perpetual inventory system and uses the FIFO cost flow assumption. During the month, it had two sales. Calculate the dollar value of its cost of goods sold for the first sale made on Jan. 10. DateActivity Jan 1Beginning Inventory 8 @ 96Jan 5Purchase12 @ 180Jan 25Purchase10 @ 180Jan 10Sale11 @ 55 eachMultiple choice question.141180
Solution
To calculate the cost of goods sold (COGS) for the first sale made on Jan. 10, we need to follow the FIFO (First-In, First-Out) method. This method assumes that the oldest inventory items are sold first.
Here's the step-by-step calculation:
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On Jan 10, ABC Co. sold 11 items. According to the FIFO method, we first take the 8 items from the beginning inventory (Jan 1) which cost 12 = $96.
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We still need to account for 3 more items (11 - 8) sold on Jan 10. These items will be taken from the next available inventory, which is the purchase made on Jan 5. These items cost 15 = $45.
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Add up the cost from step 1 and step 2 to get the total COGS for the first sale. So, 45 = $141.
Therefore, the dollar value of its cost of goods sold for the first sale made on Jan. 10 is $141.
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