### FIFO Inventory Costing Method#### OverviewIntercontinental Inc. employs a periodic inventory system. At the close of Year 2, the accounting records provide the following data related to one of its product lines:#### Inventory Details- **For the end of Year 1 (December 31):** - Units: 1,830 - Unit Cost: $6- **For Year 2:** - **Purchase on March 21:** - Units: 6,200 - Unit Cost: $5 - **Purchase on August 1:** - Units: 4,070 - Unit Cost: $3 - **Ending Inventory on December 31:** - Units: 2,910#### Calculation RequirementThe task is to calculate the amount of ending inventory and the cost of goods sold (COGS) using the FIFO (First-In, First-Out) inventory costing method. It is important to round final answers to the nearest dollar amount, avoiding rounding during intermediate calculations.#### Solution- **Ending Inventory:** $2,910- **Cost of Goods Sold (COGS):** $9,190Utilizing the FIFO method involves selling the oldest inventory first. Therefore, calculations must consider the cost implications from the oldest to the newest stock. The provided solution reflects these considerations.

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Periodic inventory system: The periodic inventory system records and updates the inventory after…

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What is the amount of ending inventory and cost of goods sold under the FIFO inventory costing method?

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Concept explainers

Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.

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Question

### FIFO Inventory Costing Method

#### Overview

Intercontinental Inc. employs a periodic inventory system. At the close of Year 2, the accounting records provide the following data related to one of its product lines:

#### Inventory Details

- **For the end of Year 1 (December 31):**
- Units: 1,830
- Unit Cost: $6

- **For Year 2:**
- **Purchase on March 21:**
- Units: 6,200
- Unit Cost: $5
- **Purchase on August 1:**
- Units: 4,070
- Unit Cost: $3
- **Ending Inventory on December 31:**
- Units: 2,910

#### Calculation Requirement

The task is to calculate the amount of ending inventory and the cost of goods sold (COGS) using the FIFO (First-In, First-Out) inventory costing method. It is important to round final answers to the nearest dollar amount, avoiding rounding during intermediate calculations.

#### Solution

- **Ending Inventory:** $2,910
- **Cost of Goods Sold (COGS):** $9,190

Utilizing the FIFO method involves selling the oldest inventory first. Therefore, calculations must consider the cost implications from the oldest to the newest stock. The provided solution reflects these considerations.

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