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Basic Question 24 of 26
Beginning inventory: 10 units @ $5 per unit
First sale: 4 units
First purchase: 10 units @ $6 per unit
Second purchase: 12 units @ $7 per unit
Second sale: 20 units
B. $36
C. $56
First sale: 4 units
First purchase: 10 units @ $6 per unit
Second purchase: 12 units @ $7 per unit
Second sale: 20 units
What is the value of the ending inventory, using a perpetual inventory system and a FIFO cost flow assumption?
A. $26
B. $36
C. $56
User Contributed Comments 6
| User | Comment |
|---|---|
| quincy | FIFO: first sale 4 leaving 6@$5, second sale 20, leaving (20-6-10-12)=8@$7, this is the ending inventory. |
| theal | damn thats annoying to calc. |
| apiccion | It's easier if you calculate the number of units in ending inventory, and then work backwards. So: 10 - 4 + 10 + 12 - 20 = 8 units in final inventory. 8 * $7 = 56 |
| safash | but shouldnt fifo consider the prices of earliest purchases hence 8 units should be multiplied by $6 per unit |
| johntan1979 | If it is periodic FIFO, answer is the same. |
| sshetty2 | neg safash, this confuses the heck out of me too, but you need to keep in mind what the question is asking. If it were asking for the COGS, then you would multiply the number of good sold with the prices of the earliest purchases. If it's asking for the monetary value of ending inventory, you would need to calculate the quantity of ending inventory and multiply it by the price of goods last purchased (under FIFO). |
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Learning Outcome Statements
describe the measurement of inventory at the lower of cost and net realisable value and its implications for financial statements and ratios
CFA® 2024 Level I Curriculum, Volume 2, Module 6.