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# FIFO Inventory and Point of Sales Revenue Recognition

14. A company bought an inventory item 4 times during the year and purchased 10 units each time. The per-unit prices paid as are as follows:

purchase 1............\$9
purchase 2............\$10
purchase 3............\$12
purchase 4.............\$13

Beginning inventory was 20 units with a per unit cost of \$. Ending inventory is 25 units. Using the FIFO method of inventory valuation, what is the amount of the ending inventory/
a. 205
b. 250
c. 300
d. 395

15. A company sells computers. Installment sales for this year total 1,500,000 and the cost of goods sold is 900,000. Receivables to be collected are 1,000,000 this year and 5,000,000 next year. Using the point of sale method of recognition, how much gross profit will the company recognize this year?
a. 100,000
b. 600,000
c. 1,000,000
d. 1,500,000

#### Solution Preview

14. Under the first-in, first-out flow assumption, only the latest units are assumed to be in the ending inventory. We thus work backwards to find the value of the ending inventory. In this case,

Purchase Number Number of Units Per-unit Cost Total Cost
4 10 ...

#### Solution Summary

14. A company bought an inventory item 4 times during the year and purchased 10 units each time. The per-unit prices paid as are as follows:

purchase 1............\$9
purchase 2............\$10
purchase 3............\$12
purchase 4.............\$13

Beginning inventory was 20 units with a per unit cost of \$8. Ending inventory is 25 units. Using the FIFO method of inventory valuation, what is the amount of the ending inventory?
a. 205
b. 250
c. 300
d. 395

15. A company sells computers. Installment sales for this year total \$1,500,000 and the cost of goods sold is \$900,000. Receivables to be collected are \$5,000,000 next year. Using the point of sale method of recognition, how much gross profit will the company recognize this year?
a. 100,000
b. 600,000
c. 1,000,000
d. 1,500,000

\$2.19