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Alphabet Company, which uses the periodic inventory method, purchases different letters for resale. Alphabet had no beginning inventory. It purchased A thru G in January at $2.50 per letter. In February, it purchased H thru L at $4.50 per letter. It purchased M thru R in March at $5.50 per letter. It sold A, D, E, H, J and N in October. There were no additional purchases or sales during the remainder of the year. If Alphabet Company uses the specific identification method, what is the cost of its ending inventory

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Answer: $51

Explanation:

A, B, C, D, E, F, G were purchased for $2.50 per letter which means they cost;

= 7 * 2.50

= $17.50

H to L were purchased at $4.50 per letter which means they cost;

= 5 * 4.5

= $22.50

M to R were purchased at $5.50;

= 6 * 5.5

= $33

Total inventory cost = 17.50 + 22.50 + 33 = $73

Inventory sold = 2.5 + 2.5 + 2.5 + 4.5 + 4.5 + 5.5

= $22

Ending Inventory = Total inventory - inventory sold

= 73 - 22

= $51

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