Question

Pepper Company has the following inventory data: July 1 Beginning inventory 20 units at $20 $ 400 7 Purchases 70 units at $21 1,470 22 Purchases 10 units at $22 220 $2,090 A physical count of merchandise inventory on July 30 reveals that there are 25 units on hand. Using the FIFO inventory method and a periodic inventory system, the amount allocated to ending inventory for July is:

Answer 1

Answer:

Amount of closing inventory balance = $535

Explanation:

As for the information provided,

Under FIFO all the goods acquired which are oldest are sold first, and latest purchases are held in inventory.

The amount in ending inventory shall be:

25 units in total:

10 units purchased at $22 each = $220

Remaining 15 units at $21 each = $315

Thus, net closing inventory = $535

This is because under FIFO all the inventory brought from previous year, and that purchased in current period firstly, are sold first.

The inventory purchased latest is sold at the last.