Use the information below to answer questions
Jan. 1 Received 1,000 units at N10 each
Jan. 2 Received 2,000 units at N12 each
Jan. 3 Issued 1,500 units
Jan. 4 Received 1,000 units at N11 each
Jan. 5 Issued 1,000 units
Using FIFO method, what is the value of the closing stock?
- N34,000
- N29,000
-
N17,000
- N12,000
The correct answer is: C
Explanation
FIFO means first in first out. This method assumes that the oldest products in a company’s inventory have been sold first. The costs paid for those oldest products are the ones used in the calculation.
| issue price method | Date | Receipt | Issue | Balance | |||||
| FIFO | Qty | price | Value | Qty | price | Value | Qty | value | |
| 1/1 | 1000 | 10 | 10000 | - | - | - | 1000 | 10000 | |
| 2/1 | 2000 | 12 | 24000 | - | - | - | 3000 | 34000 | |
| 3/1 | - | - | - | 1500 | - | 1500 | 1500 | 18000 | |
| 4/1 | 1000 | 11 | 11000 | - | - | 2500 | 2500 | 27,500 | |
| 5/1 | - | - | - | 1000 | 1500 | 1500 | 16500 |
From the table above, value of closing stock using FIFO =
Total closing stock = 1500
previous stock bought at N12 = 500 units
Last stock bought at N11 = 1000 units
12 x 500 + (11 x 1000) = 17,000