The GMA corporation shows the following data related to an item of InventoryInventory, January 1 100 units @P50 Purchases, January 9 300 units @ P54 Purchases, January 19 90 units @ P60 Sales, January 20 340 units What will be the ending inventory in units using FIFO?
Question
The GMA corporation shows the following data related to an item of InventoryInventory, January 1 100 units @P50 Purchases, January 9 300 units @ P54 Purchases, January 19 90 units @ P60 Sales, January 20 340 units What will be the ending inventory in units using FIFO?
Solution
Under the FIFO (First-In, First-Out) method, the items that were purchased first are sold first.
Here's how you calculate the ending inventory:
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Determine the total number of units sold. In this case, it's 340 units.
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Subtract the number of units sold from the total number of units purchased and in beginning inventory. In this case, it's 100 (beginning inventory) + 300 (purchased on January 9) + 90 (purchased on January 19) - 340 (sold on January 20) = 150 units.
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The remaining 150 units are the ending inventory.
However, to calculate the value of the ending inventory, you need to consider the cost of the units left.
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The first 340 units sold are the first 100 units bought @P50 and 240 out of 300 units bought @P54.
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The remaining units are 60 units bought @P54 and 90 units bought @P60.
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So, the value of the ending inventory is 60 units @P54 + 90 units @P60 = P3240 + P5400 = P8640.
So, the ending inventory is 150 units valued at P8640.
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