Question

Baldwin, Inc. had the following balances and transactions during​ 2019: Beginning Merchandise Inventory as of January​ 1, 2019 125 units at $ 80 March 10 Sold 50 units June 10 Purchased 270 units at $ 85 October 30 Sold 175 units What would be reported as Cost of Goods Sold on the income statement for the year ending December​ 31, 2019 if the perpetual inventory system and the firstminus ​in, firstminus out inventory costing method are​ used?

Answer 1

Answer:

$18,500

Explanation:

The first in first out (FIFO) inventory system assumes that It is the first purchased inventory that is the first to be sold.

Total inventory sold = 175 + 50 = 225 units

The first 50 units would be taken from the beginning inventory which costs $80. Total cost of 50 units of inventory would be $80 × 50 = $4,000

This leaves 75 units of the beginning inventory.

The 175 units sold would be taken from the remaining 75 units of the beginning inventory and the 270 units purchased

75 × $80 = $6,000

100 x $85 = $8500

Total cost of goods sold = $6,000 + $8500 + $4,000 = $18,500

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