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The Loyd Company had 150 units of product Omega on hand at December​ 1, Year​ 1, costing​ $400 each. Purchases of product Omega during December were as​ follows: Date Units Unit Cost December 7 100 $440 December 14 200 460 December 29 300 500 Sales during December were 500 units on December 30. Assume a perpetual inventory system is used. The cost of inventory at December​ 31, Year​ 1, under the FIFO method would be closest​ to:

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Answer:

$125,000

Explanation:

Under the FIFO method of inventory valuation, items brought in first are considered first for sale before items brought in later. That is why the valuation method is known as first in first out.

Under the perpetual system, purchases and sales are adjusted for in the inventory account.

On December 1

Total inventory amount

= $400 × 150

= $60,000

December 7

Amount purchased

= $440 × 100

= $44,000

December 14

Amount purchased

= $460 × 200

= $92,000

December 29

Amount purchased

= $500 × 300

= $150,000

December 30

Quantity sold is 500 units. This includes 150 units purchased at $400, 100 units purchased at $440, 200 units purchased at $460 and 50 units purchased at $500. Amount left

= 250 × $500

= $125,000

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