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Under the periodic FIFO method, 19 of 30 units available are sold (beginning 10 at $4, then 10 at $5, then 10 at $6). What is the cost of merchandise sold?
A$150
B$105
C$95
D$85
Answer & Solution
Correct answer: D. $85
1. FIFO draws the 19 units sold from the earliest stock.
2. First 10 units from beginning inventory: $10 \times \$4 = \$40$.
3. Next 9 units from the $5 purchase: $9 \times \$5 = \$45$.
4. Cost of merchandise sold = $\$40 + \$45 = \$85$.
5. Rule out $\$105$: that is the periodic LIFO cost of sales.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §4.1.2 "Periodic Inventory System", p.120_
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