Question

Question:Data for Amsterdam Company are presented in BE8-4. Compute the April 30 inventory and the April cost of

goods sold using the FIFO method.

Short answer

The ending inventory on April 30 was $5,150 and the cost of goods sold amounts to$6,700.

Step-by-step solution

Step-by-step-solutionStep1: FIFO Method

Under the FIFO method, inventories acquired first are utilized first. Thus the issued inventories are valued at the historical cost. The FIFO method eliminates the effect of inflation

Cost of goods sold by FIFO

$$\begin{gathered} \mathbf{Cost}\mathbf{}\mathbf{}\mathbf{of}\mathbf{}\mathbf{}\mathbf{goods}\mathbf{}\mathbf{sold}\mathbf{\left(}\mathbf{600}\mathbf{units}\mathbf{\right)}\mathbf{=}\mathbf{Opening}\mathbf{}\mathbf{Inventory}\mathbf{}\mathbf{value}\mathbf{+}\mathbf{April}\mathbf{15}\mathbf{}\mathbf{Purchases}\mathbf{}\mathbf{Value} \\ \mathbf{=}\mathbf{\left(}\mathbf{250}\mathbf{X}\mathbf{10}\mathbf{\right)}\mathbf{+}\mathbf{\left(}\mathbf{350}\mathbf{X}\mathbf{12}\mathbf{\right)} \\ \mathbf{=}\mathbf{\$}\mathbf{6}\mathbf{,}\mathbf{700} \end{gathered}$$

Closing inventory (FIFO)

$$\begin{gathered} \mathbf{Closing}\mathbf{}\mathbf{inventory}\mathbf{}\mathbf{(}\mathbf{in}\mathbf{}\mathbf{units}\mathbf{)}\mathbf{=}\mathbf{Opening}\mathbf{}\mathbf{inventory}\mathbf{+}\mathbf{Total}\mathbf{}\mathbf{Purchases}\mathbf{-}\mathbf{Sales} \\ \mathbf{=}\mathbf{250}\mathbf{+}\mathbf{(}\mathbf{450}\mathbf{+}\mathbf{350}\mathbf{)}\mathbf{-}\mathbf{600} \\ \mathbf{=}\mathbf{450} \end{gathered}$$

$$\begin{gathered} \mathbf{Closing}\mathbf{}\mathbf{inventory}\mathbf{\left(}\mathbf{value}\mathbf{\right)}\mathbf{=}\mathbf{Cost}\mathbf{}\mathbf{of}\mathbf{}\mathbf{}\mathbf{goods}\mathbf{}\mathbf{}\mathbf{available}\mathbf{}\mathbf{for}\mathbf{}\mathbf{sale}\mathbf{-}\mathbf{Cost}\mathbf{}\mathbf{of}\mathbf{}\mathbf{goods}\mathbf{}\mathbf{sold} \\ \mathbf{=}\mathbf{11}\mathbf{,}\mathbf{850}\mathbf{-}\mathbf{6}\mathbf{,}\mathbf{700} \\ \mathbf{=}\mathbf{\$}\mathbf{5}\mathbf{,}\mathbf{150} \end{gathered}$$