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alphabet company, which uses the periodic inventory method, purchases different letters for resale. alphabet had no beginning inventory. it purchased a thru g in january at $10.00 per letter. in february, it purchased h thru l at $12.00 per letter. it purchased m thru r in march at $13.00 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 alphabet company uses the fifo method, what is the cost of its ending inventory? multiple choice $78 $60 $130 $148



Answer :

The correct answer is $60.

solution -

Month                            Quantity       rate         Total  

January purchase            7 letters       10             70

February                           5 letters       12            60

March                                6 letters       13            78

Costs of goods sold         18                                208

Number of letters sold = 6

Closing inventory = 18 - 6 = 12

Using FIFO , Goods available for sale - ending inventory = costs of goods sold.

Goods available for sale = 208

Ending inventory = (1 * 10$) + (5 * 12$) + (6 * 13$)

= 10 + 60 + 78

= 148

Costs of goods sold = 208 - 148

= 60

To know more about closing inventory click below:

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