Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

5. Inventory

Periodic Inventory - FIFO, LIFO, and Average Cost

Financial Accounting

5. Inventory

Periodic Inventory - FIFO, LIFO, and Average Cost

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Multiple Choice

A company uses the periodic inventory system. At the end of the period, it has 200 units in ending inventory. The following purchases were made during the period:- 100 units at $10 each- 150 units at $12 each- 100 units at $14 eachIf the company uses the FIFO method, what is the total cost assigned to ending inventory?

$2,200

$2,800

$2,400

$2,600

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Verified step by step guidance

Step 1: Understand the FIFO (First-In, First-Out) method. Under FIFO, the oldest inventory costs are assigned to the cost of goods sold, and the most recent inventory costs are assigned to ending inventory.

Step 2: Identify the total number of units in ending inventory. The problem states that there are 200 units in ending inventory.

Step 3: Determine the most recent purchases, as these will be used to calculate the cost of ending inventory under FIFO. The purchases are: 100 units at $14 each, 150 units at $12 each, and 100 units at $10 each.

Step 4: Assign costs to the 200 units in ending inventory starting with the most recent purchase. First, take 100 units from the purchase of 100 units at $14 each. Then, take 100 units from the purchase of 150 units at $12 each.

Step 5: Calculate the total cost of ending inventory by multiplying the number of units taken from each purchase by their respective unit costs and summing the results. Use the formula: $ \text{Total Cost} = (\text{Units from Purchase 1} \times \text{Cost per Unit}) + (\text{Units from Purchase 2} \times \text{Cost per Unit}) $.