Chapter 5, Problem 1MCQ

To determine

Find the dollar value of Company M’s ending inventory.

Answer to Problem 1MCQ

Option (a): $2,940.

Explanation of Solution

First-in-First-Out (FIFO): In this method, items purchased initially are sold first. Therefore, the value of the ending inventory contains the recent cost for the remaining unsold items.

Find the dollar value of Company M’s ending inventory:

Date	Goods Purchased		Cost of Goods Sold		Ending Inventory
July-01	beginning balance				75 units @$25	$ 1,875
July-03	348 units @ $27	$ 9,396			75 units @$25	$ 11,271
					348 units @ $27
July-08			75 units @ $25	$ 7,950	123 units @ $27	$ 3,321
			225 units @ $27
July-15	257 units @ $28	$ 7,196			123 units @ $27	$ 10,517
					257 units @ $28
July-23			123 units @ $27	$ 7,577	105 units @ $28	$ 2,940
			152 units @ $28

Table (1)

The above calculation is matching with the option (a) $2,940. Hence, option (a) is the correct answer, options (b) (c) and (d) are incorrect.