Consider the following facts: - Company A had 500 units of inventory on hand at

Question

Consider the following facts:
- Company A had 500 units of inventory on hand at the beginning of the year.
- The unit cost of the beginning inventory items was $18 each.
- On January 14, it sold 375 units for $28 each.
- On January 17, it purchased 250 units for $20 each.
- On January 25, it purchased 250 units for $22 each.
- On January 29, it sold 260 units for $32 each.
- Company A does not use the perpetual inventory accounting method.
- At the end of January, Company A takes a physical inventory count and discovers that 365 units are on hand.

Company A's cost of inventory at the end of January is $_________ under the FIFO accounting method.

a. None of these answers are correct.

b.$6,570

c.$7,300

d.$8,030

e.$7,800

Explanation / Answer

Total units available for sale =beginning inventory + purchase

                                       = 500+ 250+250

                                        =1000 units

units sold =375 +260 = 635

units at end = 1000 -635 = 365 units

Under FIFO units acquired first are sold first so ending inventory are from last purchases.

Cost of ending inventory = (250* 22)+ [(365-250)*20)

                                  = 5500 + [115*20]

                                = 5500+ 2300

                                 =$7800

correct option is "E"

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