The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula
Ending Inventory Formula = Opening Inventory + Purchases – Cost of Goods Sold
FIFO means first in first out. According to this method, the oldest inventory is sold first and recent items are sold at the end. To calculate the ending inventory you need to find out the number of units remaining in ending inventory and simply multiply it by the unit cost of the latest purchase cost. To see the calculations see the following example.
Total Units available for sale =20+50+30+40+70 = 210
Units Sold on FIFO basis =40+55+100 = 195
Units in ending inventory = 210 – 195 = 15 Units
Cost of ending inventory under FIFO = 15 units x $9.00 = $135
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