CFA Practice Question

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CFA Practice Question

Beginning inventory: 10 units @ $10 per unit
First purchase: 35 units @ $11 per unit
Second purchase: 40 units @ $12 per unit
Third purchase: 15 units @ $13 per unit

If 83 units are sold, what is the value of the ending inventory under a periodic inventory system and a FIFO cost flow assumption?

A. $219
B. $905
C. $177
Correct Answer: A

The ending inventory (17 units) would be composed of the most recent purchases (newest layers) of 15 X $13 plus 2 X $12, or $195 + $24.

User Contributed Comments 6

User Comment
kalps Ok, remember: Perpetual constantly updated - so closing stock will be know as record kept throughout year. Periodic, the CS valuation is calculated looking at the period in question as above
spenja Still a bit confused between the two. What would be the answer in this case if a perpetual inventory system was used?
gill15 Same answer....FIFO doesnt change under perpetual or periodic.....LIFO and Weighted AVG are different between tow.
johntan1979 Actually, for this question specifically only, since the date of sale was not specified, thus, the result for perpetual or periodic LIFO and weighted average would still be the same.
wsobocin yea same accounting period so it doesn't matter
LoweJoseph why aren't all 17 units multiplied by $13?
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