Accounting FIFO

Question

In its first month of operation, Ivanhoe Company purchased 320 units of inventory for $5, then 420 units for $6, and finally 360 units for $7. At the end of the month, 400 units remained.

Compute the amount of phantom profit that would result if the company used FIFO rather than LIFO

Answer 1

Let me explain this very simply to you

Inventory-

1. 320@$5

2 420@$6

3 360@$7

The inventory left (closing stock) using FIFO method would be the whole of the last 360 items bought and 40 of the 2nd batch.

That is (40@$6)+ 360@$7

Hope this helps?