Inventory records for Dunbar Incorporated revealed the following: Date Transaction Number of Units Unit Cost Apr. 1 Beginning inventory 500 $2.40 Apr. 20 Purchase 400 2.50 Dunbar sold 700 units of inventory during the month. Ending inventory assuming FIFO would be: Select one:

A. $500.

B. $470.

C. $490.

D. $480.

option (A) $500

Explanation:

Given:

Date Transaction Number of Units Unit Cost

Apr. 1 Beginning inventory 500 $2.40

Apr. 20 Purchase 400 $2.50

Now,

Number of units sold = 700

Number of units available for sale = Beginning Inventory + Purchases

= 500 + 400

= 900

Now,

using the LIFO approach,

700 units that has been sold includes 500 units of beginning inventory and 200 units of April 20 purchases.

Therefore,

Ending Inventory = Number of units available for sale - Number of units sold

= 900 - 700

= 200 units

Cost of ending inventory = 200 units * $2.50

= $500

Hence,

The correct answer is option (A) $500

Option (A) is correct.

Explanation:

Dunbar sold 700 units during the month.

Dunbar uses FIFO inventory system,

Number of units available for sale = Beginning Inventory + Purchases

Number of units available for sale = 500 + 400

Number of units available for sale = 900

700 units sold includes 500 units of beginning inventory and 200 units of April 20 purchases.

Ending Inventory = Number of units available for sale - Number of units sold

Ending Inventory = 900 - 700

Ending Inventory = 200 units

Ending Inventory includes 200 units of April 20 purchases:

Ending Inventory = 200 units * $2.50

Ending Inventory = $500