Question: A company uses the FIFO method for inventory valuation. The following transactions occurred during January: Beginning inventory: 100 units at $5 each Purchase on January

A company uses the FIFO method for inventory valuation. The following transactions occurred during January:

  • Beginning inventory: 100 units at $5 each
  • Purchase on January 10: 200 units at $6 each
  • Purchase on January 20: 150 units at $7 each
  • Sale on January 25: 300 units at $10 each

Requirements:

  1. Calculate the cost of goods sold (COGS) for January.
  2. Determine the ending inventory value on January 31.
  3. Prepare the journal entry for the sale on January 25.
  4. Calculate the gross profit for January.
  5. Explain the impact of the FIFO method on the financial statements in periods of rising prices.

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