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A company's inventory records report the following: Date Activities Units Acquired at Cost Units Sold at RetailAugust 1 Beginning inventory 15 units @ $38 = $570  August 5 Purchase 10 units @ $39 = $390  August 12 Purchase 20 units @ $40 = $800  August 15 Sales   30 units soldUsing the FIFO perpetual inventory method, what is the value of the inventory at August 15 after the sale?Multiple Choice$400$290$600$1,160$1,760

Question

A company's inventory records report the following: Date Activities Units Acquired at Cost Units Sold at RetailAugust 1 Beginning inventory 15 units @ 38=38 = 570  August 5 Purchase 10 units @ 39=39 = 390  August 12 Purchase 20 units @ 40=40 = 800  August 15 Sales   30 units soldUsing the FIFO perpetual inventory method, what is the value of the inventory at August 15 after the sale?Multiple Choice4004002906006001,160$1,760

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Solution

Under the FIFO (First-In, First-Out) perpetual inventory method, the first units purchased are the first ones to be sold.

Here's how you calculate the value of the inventory at August 15 after the sale:

  1. On August 1, the company starts with 15 units at 38each,totaling38 each, totaling 570.

  2. On August 5, the company purchases an additional 10 units at 39each,adding39 each, adding 390 to the inventory value.

  3. On August 12, the company purchases 20 more units at 40each,adding40 each, adding 800 to the inventory value.

    So, before any sales, the total value of the inventory is 570+570 + 390 + 800=800 = 1,760.

  4. On August 15, the company sells 30 units. According to the FIFO method, the company sells the oldest units first.

    So, the first 15 units sold are from the August 1 inventory (15 units @ 38=38 = 570), and the next 15 units sold are from the August 5 inventory (10 units @ 39=39 = 390) and 5 units from the August 12 inventory (5 units @ 40=40 = 200).

    This totals to 570+570 + 390 + 200=200 = 1,160.

  5. To find the value of the inventory after the sale, subtract the value of the units sold from the total inventory value before the sale.

    So, 1,760−1,760 - 1,160 = $600.

Therefore, the value of the inventory at August 15 after the sale is $600.

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