If Exxon uses FIFO for its inventory valuation, calculate the cost of ending inventory and cost of goods sold if ending inventory is 110 barrels of crude oil. Beginning inventory and purchases Beginning inventory: Jan 1 March 1 June 1 September 1 December 1 Cost of ending inventory Cost of goods sold Barrels Barrel cost 127 52 67 77 52 375 $94 103 97 92 102 Total cost $11,938 5,356 6,499 7,084 5,304 $36,181
If Exxon uses FIFO for its inventory valuation, calculate the cost of ending inventory and cost of goods sold if ending inventory is 110 barrels of crude oil. Beginning inventory and purchases Beginning inventory: Jan 1 March 1 June 1 September 1 December 1 Cost of ending inventory Cost of goods sold Barrels Barrel cost 127 52 67 77 52 375 $94 103 97 92 102 Total cost $11,938 5,356 6,499 7,084 5,304 $36,181
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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![**FIFO Inventory Valuation: Cost of Ending Inventory and Cost of Goods Sold Calculation**
**Problem Statement:**
If Exxon uses FIFO (First-In, First-Out) for its inventory valuation, calculate the cost of ending inventory and cost of goods sold if ending inventory is 110 barrels of crude oil.
**Data Provided:**
**Beginning Inventory and Purchases**
| Transaction Date | Barrels | Barrel Cost | Total Cost |
|------------------------|---------|-------------|-------------|
| Beginning inventory: Jan 1 | 127 | $94 | $11,938 |
| March 1 | 52 | $103 | $5,356 |
| June 1 | 67 | $97 | $6,499 |
| September 1 | 77 | $92 | $7,084 |
| December 1 | 52 | $102 | $5,304 |
| **Total** | **375** | | **$36,181** |
**Solution Steps:**
1. **Calculation of Ending Inventory:**
Under the FIFO method, the ending inventory is determined by taking the most recent purchases first until the desired amount of ending inventory is accounted for. For an ending inventory of 110 barrels, start from the latest purchase and work backward.
- From December 1: 52 barrels at $102 each
- From September 1: 58 barrels at $92 each (110 - 52 barrels taken from December 1)
**Calculation:**
- December 1: 52 * $102 = $5,304
- September 1: 58 * $92 = $5,336
**Total Ending Inventory:**
\( 5,304 + 5,336 = 10,640 \)
2. **Calculation of Cost of Goods Sold (COGS):**
Since the total number of barrels is 375 and ending inventory is 110 barrels, the barrels sold are:
\[ 375 - 110 = 265 \]
Using the FIFO method, the cost of goods sold includes the oldest inventory first:
- From January 1: 127 barrels at $94 each
- From March 1: 52 barrels at $103 each
- From June 1: 67 barrels at $97 each
- From September 1: 19 barrels](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9ff6323c-cf7e-493a-b269-a8fbd92b416a%2Fd49c3b35-5af0-456c-92da-1769d2706ef2%2F58jsbw_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**FIFO Inventory Valuation: Cost of Ending Inventory and Cost of Goods Sold Calculation**
**Problem Statement:**
If Exxon uses FIFO (First-In, First-Out) for its inventory valuation, calculate the cost of ending inventory and cost of goods sold if ending inventory is 110 barrels of crude oil.
**Data Provided:**
**Beginning Inventory and Purchases**
| Transaction Date | Barrels | Barrel Cost | Total Cost |
|------------------------|---------|-------------|-------------|
| Beginning inventory: Jan 1 | 127 | $94 | $11,938 |
| March 1 | 52 | $103 | $5,356 |
| June 1 | 67 | $97 | $6,499 |
| September 1 | 77 | $92 | $7,084 |
| December 1 | 52 | $102 | $5,304 |
| **Total** | **375** | | **$36,181** |
**Solution Steps:**
1. **Calculation of Ending Inventory:**
Under the FIFO method, the ending inventory is determined by taking the most recent purchases first until the desired amount of ending inventory is accounted for. For an ending inventory of 110 barrels, start from the latest purchase and work backward.
- From December 1: 52 barrels at $102 each
- From September 1: 58 barrels at $92 each (110 - 52 barrels taken from December 1)
**Calculation:**
- December 1: 52 * $102 = $5,304
- September 1: 58 * $92 = $5,336
**Total Ending Inventory:**
\( 5,304 + 5,336 = 10,640 \)
2. **Calculation of Cost of Goods Sold (COGS):**
Since the total number of barrels is 375 and ending inventory is 110 barrels, the barrels sold are:
\[ 375 - 110 = 265 \]
Using the FIFO method, the cost of goods sold includes the oldest inventory first:
- From January 1: 127 barrels at $94 each
- From March 1: 52 barrels at $103 each
- From June 1: 67 barrels at $97 each
- From September 1: 19 barrels
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