A company purchased 100 units for $30 each of 31 January. It purchased 130 units for $39 each on 28 February. It sold a total of 160 units for $45 each from 1 march to 31 December. What is the amount of ending inventory on 31 December if the company uses the first-in, first-out (FIFO) inventory costing method? (assume that the company uses a perpetual inventory system)

The amount of ending inventory on 31 December is $2,730

Explanation:

Under First-in-first-out method, the company sell the old products than the new

In the given question,

On 31 Jan it purchase 100 units for $30 = 100 units * $30 = $3,000

On 28 Feb it purchase 130 units for $39 = 130 units * $39 = $5,070

And, from 1 march to 31 December it sold 160 units for $45 each

The 160 units could be taken from

100 units * $30 = $3,000

And remaining 60 units * $39 = $2,340

So, the remaining units i. e 70 units (130 units - 60 units) would be closing inventory units

So, the closing inventory = 70 units * $39 = $2,730