Questions: A company purchased 110 units for 40 each on January 31. It purchased 160 units for 35 each on February 28. It sold 160 units for 80 each from March 1 through December 31. If the company uses the first-in, first-out inventory costing method, what is the amount of Cost of Goods Sold on the income statement for the year ending December 31? (Assume that the company uses a perpetual inventory system. A. 5,600 B. 10,000 C. 4,400 D. 6,150

The answer is the first one (A): \$5,600.

Explanation: To determine the Cost of Goods Sold (COGS) using the First-In, First-Out (FIFO) inventory costing method, we need to follow these steps:

1. Identify the cost of the units sold.
2. Since the company uses FIFO, the first units purchased are the first ones to be sold.

The company purchased:

• 110 units at \$40 each on January 31.
• 160 units at \$35 each on February 28.

The company sold 160 units from March 1 through December 31.

Using FIFO, the first 110 units sold would be from the January 31 purchase, and the remaining 50 units sold would be from the February 28 purchase.

Calculations:

• Cost of the first 110 units: 110 units * \$40/unit = \$4,400
• Cost of the next 50 units: 50 units * \$35/unit = \$1,750

Total COGS = \$4,400 + \$1,750 = \$6,150

Therefore, the correct answer is D: \$6,150.