Question

Sheldon Company had 2,000 units of inventory costing $10,000 in beginning inventory at July 1^st. During July, Sheldon Co. engaged in the following transactions:

July 3^rd - The company paid cash to purchase 1,000 units of inventory for $6,500.
July 10^th - The company paid cash to purchase 1,200 units of inventory for $8,400.

July 24^th – The company paid cash to purchase 250 units of inventory for $2,125.

Throughout July, the company sold inventory 3,700 units of inventory for $44,400 cash.

20. What is the total cost of goods available for sale?

	a.	$ 27,025
	b.	$ 17,375
	c.	$ 44,400
	d.	$ 17,025

21Under a FIFO valuation method, what is the dollar value of Sheldon Co.’s cost of goods sold in July?

	a.	$44,400
	b.	$8,750
	c.	$21,400
	d.	$23,275

22Under a FIFO valuation method, what is the dollar value of Sheldon Co.’s ending inventory balance at July 31^st?

	a.	$5,625
	b.	$3,750
	c.	$17,375
	d.	$8,750

23Under a LIFO valuation method, what is the dollar value of Sheldon Co.’s cost of goods sold for July?

	a.	$44,400
	b.	$21,400
	c.	$18,275
	d.	$23,275

24Under a LIFO valuation method, what is the dollar value of Sheldon Co.’s ending inventory balance at July 31^st?

	a.	$17,375
	b.	$23,275
	c.	$3,750
	d.	$5,625

Answer 1

Ans. 20	Option a   $27,025
	Date		Units (a)	Total cost (b)
	01-Jul		2000	$10,000
	03-Jul		1000	$6,500
	10-Jul		1200	$8,400
	24-Jul		250	$2,125
	Cost of goods available for sale		4450	$27,025
Ans. 21	Option c    $21,400
	First of all, we will calculate the Cost per unit of each transaction.
	Cost per unit = Total cost / Units
	Date	Units (a)	Total (b)	Cost per unit (b/a)
	01-Jul	2000	$10,000	$5.00
	03-Jul	1000	$6,500	$6.50
	10-Jul	1200	$8,400	$7.00
	24-Jul	250	$2,125	$8.50
	*Now we can calculate the cost of goods under FIFO method.
	Periodic FIFO:
	Date	Units	Rate	Total
	01-Jul	2000	$5.00	$10,000
	03-Jul	1000	$6.50	$6,500
	10-Jul	700	$7.00	$4,900
	Cost of goods sold	3700		$21,400
	*In FIFO method the units that have purchased first, are released the first one and the ending inventory
	units remain from the last purchases.
Ans. 22	Option 1st $5,625
	Periodic FIFO:
	Ending inventory = Total cost of goods available for sale -   Cost of goods sold
	$27,025 - $21,400
	$5,625
Ans. 23	Option d   $23,275
	Periodic LIFO:
	Date	Units	Rate	Total
	24-Jul	250	$8.50	$2,125
	10-Jul	1200	$7.00	$8,400
	03-Jul	1000	$6.50	$6,500
	01-Jul	1250	$5.00	$6,250
	Cost of goods sold	3700		$23,275
	*In LIFO method the units that have purchased last, are released the first one and ending inventory units
	remain from the first purchase.
Ans. 24	Option c   $3,750
	Ending inventory = Total cost of goods available for sale -   Cost of goods sold
	$27,025 - $23,275
	$3,750