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Using FIFO, you calculate the cost of goods sold expense as follows: In short, you use the first three units to calculate cost of goods sold expense. The cost of the ending inventory asset, then, is $106, which is the cost of the most recent acquisition.The $412 total cost of the four units is divided between $306 cost of goods sold expense for the three units sold and the $106 cost of the one unit in ending inventory.The total cost has been accounted for; nothing has fallen between the cracks.he $412 total cost of the four units is divided between $306 cost of goods sold expense for the three units sold and the $106 cost of the one unit in ending inventory. The total cost has been accounted for; nothing has fallen between the cracks.
Note: 400 units from beginning inventory were sold on May 8. 200 units from May 15 purchase were sold on May 25. 100 units from May 15 purchase were sold on May 27. 100 units from May 3 purchase were sold on May 8. 200 units from May 25 purchase were sold on May 25. FIFO valuation under periodic inventory system. Under periodic inventory system, cost of inventories is calculated at the end of each accounting period (on May 31 in this example). Using LIFO, units purchased last are assumed to be sold first. Click here for LIFO solutions to example 1 in pdf file.