Home › ACCA › Financial Accounting › Inventory Valuation › A merchandiser holds 30 identical units bought a…
A merchandiser holds 30 identical units bought as 10 at $1, 10 at $2, and 10 at $3. The company sells one unit for $10. Using FIFO, what is the gross profit on that sale?
A$7
B$8
C$9
D$10
Answer & Solution
Correct answer: C. $9
1. Under FIFO the unit sold takes the earliest cost, which is $\$1$.
2. Gross profit = selling price - cost = $\$10 - \$1$.
3. Gross profit = $\$9$.
4. Rule out $\$7$: that is the LIFO result using the $\$3$ cost.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §4.1 "Inventory", p.113_
Related questions
Correct ending inventory is $20,000, but a missed item causes only $19,500 to be reported.A company overstates its ending Merchandise Inventory. What is the combined effect on totaIf a company understates its ending Merchandise Inventory in the physical count, what is tGoods a company has sold are in transit on a carrier under shipping terms of FOB destinatiWhen a physical inventory count is taken, which item should be EXCLUDED from a company's cUnder IFRS, the comparison used to write inventory down when its value falls below cost isA company holds 200 units of a phone bought at $100 each whose current value has fallen toA company values inventory at lower of cost and net realisable value across four commoditi