ACCA Applied Knowledge · Financial Accounting · Inventories
Marlow Co had no opening inventory. It purchased 100 units at $10 each, then 200 units at $13 each, and then sold 150 units. Using the FIFO method, what is the cost of the closing inventory?
Closing inventory is $1,950. Under FIFO the oldest units are sold first, so the 150 units sold take all 100 units at $10 and 50 units at $13. The remaining 150 units are all valued at the latest price of $13 each.
- A$1,950
- B$2,200Correct
- C$1,650
- D$1,800
Explanation
Total purchased is 300 units, so 150 units remain. Under FIFO the 150 sold are the first 100 at $10 and 50 at $13. Closing inventory is the remaining 150 units at $13 = $1,950. Check: total cost is $1,000+$2,600=$3,600; cost of sales is $1,000+$650=$1,650; $3,600-$1,650=$1,950.
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