Tiny Trikes began April with 200 units of their basic tricycle having a unit cost of $20 in inventory. Relevant information is listed as follows: If Tiny Trikes uses the FIFO cost assumption method, what amount will it report for cost of goods sold for April for the basic tricycle?

Cost of goods sold = $2,850 (answer)

Explanation:

Since the question lacks complete information and my objective is to provide you with the best way to deal with this sort of questions on your own, therefore, I am using the following information to solve the question

In order to solve this question, we first need to know about the following key concepts:

Period inventory system:

Cost of goods sold available for - ending inventory

First in First Out (FIFO) Method:

Cost of goods sold:

Ending inventory:

Step 1:

Calculate the units of ending inventory

Units of ending inventory= Units available for sale - Units sold

Units of ending inventory = (Beginning inventory + Purchase 1 + Purchase 2)  - 500 units

Units of ending inventory = (200 units + 250 units + 400 units) - 500 units

Units of ending inventory = 350 units

Explanation:

FIFO method assumes that inventory purchased first is sold first. It implies, that units sold are from the opening inventory, purchase 1 and part from the purchase 2. Ending inventory will consist of the units purchased in purchase 2.

Step 2

Calculate the ending inventory:

We are determining the amount of inventory as per FIFO method as follows:

Ending inventory would be the balance from purchase 2:

Ending inventory = Balance from purchase 2

Ending inventory = Number of units in ending inventory × Cost per unit

Ending inventory = 350 units × $7 per unit

Ending inventory = $2,450

Step 3:

Calculate the cost of goods available for sale

Value of opening inventory = 200 units ×$5 per unit = $1,000 (A)

Value of purchase 1 = 250 units ×$6 per unit = $1,500 (B)

Value of purchase 2 = 400 units ×$7 per unit = $2,800 (C)

Adding A+B+C = $1,000 + $1,500 + $2,800 = $5,300 = Cost of goods available for sale

Step 4:

Cost of goods sold as per FIFO method:

Cost of goods sold = Cost of goods available for sale - Ending inventory

Cost of goods sold = $5,300 - $2,450

Cost of goods sold = $2,850 (answer)

If Tiny Trikes uses the FIFO cost assumption method, the  amount  that  it will report for cost of goods sold for April for the basic tricycle is $8,400

Cost of goods sold will be the cost of the beginning inventory plus  purchases

Using this formula

Cost of goods sold=Beginning inventory + Purchases

Let plug in the formula

Cost of goods sold=(200×$20) + (200×$22)

Cost of goods sold=$4,000+$4,400

Cost of goods sold=$8,400

Inconclusion if Tiny Trikes uses the FIFO cost assumption method, the  amount  that  it will report for cost of goods sold for April for the basic tricycle is $8,400

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