Assume that Sparks uses a periodic FIFO inventory system. Its ending inventory consists of 9 units. Calculate the dollar value of its ending inventory. Date Activity Jan. 1Beginning Inventory10 @ $12Jan. 5Purchase10 @ $15Jan. 30Purchase10 @ $18Feb. 8Sale21 unitsMultiple choice question.$90$135$288$162
Question
Assume that Sparks uses a periodic FIFO inventory system. Its ending inventory consists of 9 units. Calculate the dollar value of its ending inventory. Date Activity Jan. 1Beginning Inventory10 @ 15Jan. 30Purchase10 @ 90288$162
Solution
To calculate the dollar value of the ending inventory using the FIFO (First-In, First-Out) method, we need to consider the order in which the inventory was purchased.
Here's the step-by-step calculation:
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Sparks sold 21 units. According to FIFO, we sell the oldest inventory first. So, the 10 units bought on Jan. 1 and 11 units from the Jan. 5 purchase were sold.
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This leaves us with 9 units in the ending inventory. These 9 units are from the purchases made on Jan. 5 (10 units - 11 units sold = -1 unit, so we need to take 1 unit from the Jan. 30 purchase) and Jan. 30.
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The cost of these 9 units is calculated as follows:
- 1 unit from Jan. 5 purchase: 1 unit * 15
- 8 units from Jan. 30 purchase: 8 units * 144
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Add these two amounts together to get the total cost of the ending inventory: 144 = $159
So, the dollar value of the ending inventory is $159. However, this option is not available in the multiple choices provided. There might be a mistake in the question or the provided choices.
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