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Hi,
Would appreciate if someone could help me on the following question (the working) , many thanks.
Question: A firm uses FIFO for inventory accounting and reports a COGS of $32000. Use the following information to compute COGS on a current cost basis:
Beginning Ending
Inventory value $7515 $8163
Units in inventory $450 $470
A. $32300
B. $33280
C. $33422
D. $34759
Cost of goods sold
At the beginning of an accounting period the inventory is valued at $50,000. Purchases are made of $30,000 and ending inventory is $45,000. We can use this Equation to compute the COGS as:
COGS = BI + P - EI EI = Ending inventory
BI = Beginning inventory
P = Purchases
COGS = Cost of goods soldCOGS = $50,000 + $30,000 - $45,000
There are three main methods of accounting for the cost of inventory that is sold.
FIFO – First In, First Out means that the cost assigned to the unit sold is the one associated with the unit in inventory that was purchased first. Therefore the units held in inventory are those purchased last.
LIFO – Last In, First Out means that the cost assigned to the unit sold is the one associated with the unit in inventory that was purchased last. Therefore the units held in inventory are those purchased first.
Weighted-Average Cost – Units in inventory are assigned the same average cost as the units sold. I hope this helps.
COGS (LIFO) = $32,000 + ($7515 x 0.04) = $32,300.6
so answer A is closest. A. $32300
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