Trey Monson starts a merchandising business on December 1 and enters into the following three inventory purchases. Monson uses a perpetual inventory system. Also, on December 15, Monson sells 15 units for $20 each.Purchases on December 710 units @ $ 6 costPurchases on December 1420 units @ $12 costPurchases on December 2115 units @ $14 costRequired:Determine the costs assigned to the December 31 ending inventory based on the FIFO method.

To find the cost of the ending inventory using the FIFO (First-In, First-Out) method, we follow these steps:

### 1. **List of Inventory Purchases**
- **December 7:** 10 units @ $6 = $60
- **December 14:** 20 units @ $12 = $240
- **December 21:** 15 units @ $14 = $210

### 2. **Total Units Purchased**
- Total units = 10 + 20 + 15 = **45 units**

### 3. **Sale on December 15**
- 15 units were sold for $20 each (Sales price is not relevant for calculating inventory cost).
- Under FIFO, the oldest inventory is sold first.

### 4. **Calculate Cost of Goods Sold (COGS) for Sale on December 15**
- Since the sale occurred after the first two purchases, the cost of the sold units is taken from the earliest batches in the order they were purchased.

#### Cost Breakdown for the 15 units sold:
1. The first 10 units come from the December 7 purchase:
   - 10 units @ $6 = $60
2. The remaining 5 units come from the December 14 purchase:
   - 5 units @ $12 = $60

**Total COGS:** $60 (from December 7) + $60 (from December 14) = **$120**

### 5. **Determine Remaining Inventory**
After the sale, the remaining inventory consists of:
- From December 14: 15 units (20 originally - 5 sold) @ $12 = $180
- From December 21: 15 units @ $14 = $210

### 6. **Ending Inventory Cost (as of December 31)**
- 15 units @ $12 = $180
- 15 units @ $14 = $210

**Total ending inventory cost:** $180 + $210 = **$390**

### Final Answer
The costs assigned to the December 31 ending inventory based on the FIFO method is **$390**.

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Would you like a detailed breakdown of any part of this solution, or do you have further questions?

### Related Questions
1. What would be the ending inventory cost using the LIFO method?
2. How would the average cost method change the ending inventory value?
3. What is the gross profit for the sale made on December 15?
4. How does a perpetual inventory system differ from a periodic inventory system?
5. How would the ending inventory cost change if an additional purchase was made on December 31?

### Tip
For FIFO, always remember that the cost of the earliest inventory purchased is the first to be allocated to the cost of goods sold.

Trey Monson starts a merchandising business on December 1 and enters into the following three inventory purchases. Monson uses a perpetual inventory system. Also, on December 15, Monson sells 15 units for $20 each. Purchases on December 7: 10 units @ $6 cost, Purchases on December 14: 20 units @ $12 cost, Purchases on December 21: 15 units @ $14 cost. Required: Determine the costs assigned to the December 31 ending inventory based on the FIFO method.

Learn how to calculate the ending inventory and cost of goods sold using the FIFO method for Trey Monson's merchandising business. This example involves multiple purchases and a sale in December. Understand the perpetual inventory system with a breakdown of FIFO principles and calculations.

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