Question

Panamerican Foods, which uses the periodic inventory method, buys and sells barrels of aged balsamic vinegar. Panamerican had no beginning inventory. It purchased seven barrels in January at $3.50 per barrel. In February, it purchased five barrels at $5.50 per barrel. It purchased six barrels in March at $6.50 per barrel. It sold six barrels in October. There were no additional purchases or sales during the remainder of the year.

If Panamerican Foods uses the FIFO method, what is the cost of its ending inventory?

Multiple Choice

• $70

• $39

• $21

• None of the other answers are correct.

• $52

Answer 1

Ans.	Option 1st $70
	Step 1 :Calculations of Goods available for sale :
	Months	Units (a)	Unit cost (b)	Total (a*b)
	January	7	$3.50	$25
	February	5	$5.50	$28
	March	6	$6.50	$39
	Available for sale	18		$91
	Step 2 :Calculations of Ending inventory units :
	Ending inventory units = Units available for sale - Total units sold
	18 - 6
	12   units (barrels)
	Step 3 :Calculations of Cost of ending inventory :
	Periodic FIFO:
	Date	Units	Rate	Total
	March	6	$6.50	$39
	February	5	$5.50	$28
	January	1	$3.50	$4
	Ending inventory	12		$70
	*In FIFO method the units that have purchased first, are released the first one and the ending inventory
	units remain from the last purchases.