On May 1, Pharoah Company had 430 units of inventory on hand, at a cost of $4.00 each. The company uses a perpetual inventory system. All purchases and sales are on account. A record of inventory transactions for the month of May for the company is as follows:

A"

★

Purchases

Sales

May 4

1,500

@

$4.20

May 3

260

@

$7.00

14

780

@

$4.30

16

1,100

@

$7.00

29

400

@

$4.75

18

570

@

$7.50

(a)

Calculate the cost of goods sold and ending inventory using FIFO.

To calculate the Cost of Goods Sold (COGS) and Ending Inventory using the First-In, First-Out (FIFO) method for Pharoah Company, follow these steps:

### Beginning Inventory (May 1)
- 430 units @ $4.00 each = $1,720

### Purchases
1. **May 4:** 1,500 units @ $4.20 each = $6,300
2. **May 14:** 780 units @ $4.30 each = $3,354
3. **May 29:** 400 units @ $4.75 each = $1,900

### Sales
1. **May 3:** 260 units @ $7.00 each
2. **May 16:** 1,100 units @ $7.00 each
3. **May 18:** 570 units @ $7.50 each

### Step-by-Step FIFO Calculation

#### May 3 Sale
- Sold: 260 units @ $7.00 each
- From Beginning Inventory: 260 units @ $4.00 each
- COGS: 260 units * $4.00 = $1,040
- Remaining from Beginning Inventory: 430 - 260 = 170 units @ $4.00

#### May 4 Purchase
- Added to Inventory: 1,500 units @ $4.20 each

#### May 16 Sale
- Sold: 1,100 units @ $7.00 each
- From Beginning Inventory: 170 units @ $4.00 each
- From May 4 Purchase: 930 units @ $4.20 each
- COGS: (170 * $4.00) + (930 * $4.20) = $680 + $3,906 = $4,586
- Remaining from May 4 Purchase: 1,500 - 930 = 570 units @ $4.20 each

#### May 14 Purchase
- Added to Inventory: 780 units @ $4.30 each

#### May 18 Sale
- Sold: 570 units @ $7.50 each
- From May 4 Purchase: 570 units @ $4.20 each
- COGS: 570 units * $4.20 = $2,394
- Remaining from May 4 Purchase: 0 units

#### May 29 Purchase
- Added to Inventory: 400 units @ $4.75 each

### Remaining Inventory Calculation

After all sales and purchases:
1. **Remaining from May 14 Purchase:** 780 units @ $4.30 each
2. **Remaining from May 29 Purchase:** 400 units @ $4.75 each

Total Remaining Inventory = (780 units * $4.30) + (400 units * $4.75)
= $3,354 + $1,900
= $5,254

### Total COGS Calculation

COGS from each sale:
1. May 3: $1,040
2. May 16: $4,586
3. May 18: $2,394

Total COGS = $1,040 + $4,586 + $2,394
= $8,020

### Summary
- **Cost of Goods Sold (COGS):** $8,020
- **Ending Inventory:** $5,254

Would you like more details or have any questions about this solution?

Here are some more questions you might want to explore:
1. What is the weighted average cost method for calculating COGS and ending inventory?
2. How would the LIFO method affect the COGS and ending inventory for the same data?
3. What are the advantages and disadvantages of using the FIFO method?
4. How do you calculate the gross profit for the period?
5. What is the impact of these inventory methods on the financial statements?

**Tip:** Always ensure your inventory records are up-to-date and accurate for better financial management and reporting.

Learn how to calculate the Cost of Goods Sold (COGS) and Ending Inventory using the First-In, First-Out (FIFO) method with a detailed step-by-step solution for Pharoah Company's inventory transactions in May. Understand the impact of purchases and sales on inventory valuation. Suitable for professionals and learners interested in inventory costing methods.

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