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A perpetual-system merchandiser has: 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 the ending inventory balance at 6/30?
A$52
B$58
C$60
D$65
Answer & Solution
Correct answer: D. $65
1. Total available = beginning $\$40$ + purchases $\$50 + \$60 = \$150$ for 30 units.
2. Under FIFO, cost of merchandise sold for the 19 units sold is $\$85$.
3. Ending inventory = available - cost of sales = $\$150 - \$85 = \$65$.
4. The 11 units remaining are 1 unit at $5 ($\$5$) plus 10 units at $6 ($\$60$) = $\$65$.
5. Rule out $\$52$: that is the LIFO ending balance.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §4.1.1 "Perpetual Inventory System", p.116_
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