Question

Chase Co. uses the perpetual inventory method. The inventory records for Chase reflected the following

Jan 1	Beginning inventory	300	units	@	$	2.30
Jan 12	Purchase	400	units	@	$	2.10
Jan 18	Sales	500	units	@	$	3.80
Jan 21	Purchase	300	units	@	$	2.40
Jan 25	Purchase	100	units	@	$	2.20
Jan 31	Sales	450	units	@	$	3.80

Assuming Chase uses a FIFO cost flow method, the cost of goods sold for the sales transaction on January 31 is:

Multiple Choice

$1,020.

$1,005.

$1,045.

$340.

Answer 1

COGS for 450 units sold on January 31=(200 units@$2.1)+(250 units@$2.4)

=$1020(A)

As per perpetual inventory system;goods sold as on Jan 18 would consist of 300 units of beginning inventory and the balance(500-300)=200 units purchased @$2.1 each.Hence goods sold on January 31 would consist of (200 units@$2.1).Balance (450-200)=250 units would consist of purchases made @$2.4 each.