Question

The following units and costs of lawnmower Model 200 were available for sale during the year for Craftsman Hardware:

Beginning inventory ……………..	10 units at $130
First purchase ……………………	15 units at $135
Second purchase ………………..	30 units at $140
Third purchase ……………………	20 units at $145

Craftsman has 35 units on hand at the end of the year. What is the dollar amount of cost of goods sold for the year according to the first-in, first-out method?

Answer 1

Ans.	Calculations for Units and cost of Available for sale :
	Transaction	Units	Rate	Total
	Beginning inventory	10	$130.00	$1,300
	First purchase	15	$135.00	$2,025
	Second purchase	30	$140.00	$4,200
	Third purchase	20	$145.00	$2,900
	Cost of goods available for sale	75		$10,425
	Number of units in ending inventory =   35 units
	Units sold =   Units available for sale - Units in ending inventory
	75 - 35
	40 units
	First - in, First - out Method:
	Transaction	Units	Rate	Total
	Beginning inventory	10	$130.00	$1,300
	First purchase	15	$135.00	$2,025
	Second purchase	15	$140.00	$2,100
	Cost of goods sold	40		$5,425
	*In FIFO method the units that have purchased first (earliest), are released the first one and the ending inventory
	units remain from the last (recent) purchases.