Question

LetterCo, which uses the periodic inventory method, purchases different letters for resale. LetterCo had no beginning inventory. It purchased A thru G in January at $8.00 per letter. In February, it purchased H thru L at $10.00 per letter. It purchased M thru R in March at $11.00 per letter. It sold A, D, E, H, J and N in October. There were no additional purchases or sales during the remainder of the year. If LetterCo uses the FIFO method, what is the cost of its ending inventory?

• $66

• $48

• $124

• $106

Answer 1

Correct answer-----------$124

Working

	Units	Cost per unit	value
Beginning Balance			$ 0
Purchases
A-G	7	$                     8.00	$ 56
H-L	5	$                   10.00	$ 50
M-R	6	$                   11.00	$ 66
Cost of goods available for sale	18		$ 172

.

FIFO
Total Units Available for sale		18
Units Sold		6
Closing Stock in Units		12
Valuation
Ending Inventory	6	@	$             11.00	$ 66
	5	@	$             10.00	$ 50
	1	@	$               8.00	$ 8
Value Of Ending Inventory				$ 124
Cost of Goods sold	172 minus 124			$              48.00