Chapter 5, Problem 1MCQ

To determine

Perpetual Inventory System:

The perpetual inventory system is that system of accounting the inventory in which the inventory is verified physically. This is done so that the lost and misplaced items are also recorded. The entries are made through merchandise accounts.

The dollar value of the ending inventory using FIFO.

Explanation of Solution

Option a, $2,940 is correct.

Given,

The company uses perpetual FIFO inventory system.

Calculation of the value of ending inventory:

Date	Goods purchased	Cost of goods sold	Inventory balance
July 1			$75\times \$25=\$1,875$
July 3	348 units	$348\times \$27=\$9,396$	$\begin{array}{l}75\times \$25=\$1,875\\ 348\times \$27=\$9,396\end{array}\}=\$11,271$
July 8		$\begin{array}{l}75\times \$25=\$1,875\\ 225\times \$27=\$6,075\end{array}\}=\$7,950$	$123\times \$27=\$3,321$
July 15	257 units	$257\times \$28=\$7,196$	$\begin{array}{l}123\times \$27=\$3,321\\ 257\times \$28=\$7,196\end{array}\}=\$10,517$
July 23		$\begin{array}{l}123\times \$27=3,321\\ 152\times \$28=4,256\end{array}\}=\$7,577$	$105\times \$28=\$2,940$
		$15,527	$2,940

The value of the ending inventory is $2,940.

Thus, option a is correct.