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A perpetual-system merchandiser has these June transactions for one product: 6/1 beginning 10 units at $4; 6/5 sell 1; 6/10 buy 10 at $5; 6/16 sell 12; 6/22 buy 10 at $6; 6/30 sell 6. Using FIFO, what is total cost of merchandise sold for June?
A$98
B$95
C$90
D$85
Answer & Solution
Correct answer: D. $85
1. 6/5 sale of 1 unit comes from the $4 layer: $1 \times \$4 = \$4$.
2. 6/16 sale of 12 units: the remaining 9 units at $4 ($\$36$) plus 3 units at $5 ($\$15$) = $\$51$.
3. 6/30 sale of 6 units from the $5 layer: $6 \times \$5 = \$30$.
4. Total cost of sales = $\$4 + \$51 + \$30 = \$85$.
5. Rule out $\$98$: that is the LIFO result for the same data.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §4.1.1 "Perpetual Inventory System", p.116_
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