Consider the following information: Date Particulars Units Rate per unit (Rs.) January 1 Inventory in hand 200 7 January 8 Purchases 1100 8 January 25 Purchases 300 9 January 6 Issued for sale 100 – January 9 Issued for sale 200 – Which one of the following is the value of inventory on January 31 under perpetual inventory system using First – In – First – Out (FIFO) method?
- ARs. 6,700
- BRs. 8,700
- CRs. 10,700
- DRs. 12,000
Explanation
Under FIFO (perpetual), the January 6 issue of 100 units comes from the January 1 lot (200 @ Rs. 7). The January 9 issue of 200 units takes the remaining 100 @ Rs. 7 and then 100 @ Rs. 8 from the January 8 lot (1,100 @ Rs. 8). Closing inventory is therefore 1,000 units @ Rs. 8 (= Rs. 8,000) plus 300 units @ Rs. 9 (= Rs. 2,700), totalling Rs. 10,700, option (c).