FIFO values closing inventory with most recent costs after depleting oldest stock first

Steps:

• Opening: 400 units @ $10.00; February buy adds 100 units @$11.50 (total 500 units).
• June sale of 200 units uses oldest stock: 200 @ $10.00; remaining 200 @$10.00 + 100 @ $11.50.
• August buy adds 300 units @ $12.00 (total 600 units).
• Additional sale of 200 units (to reach closing 400) uses next oldest: 100 @ $11.50 + 100 @$10.00.
• Closing value: remaining 100 @ $10.00 ($1,000) + 300 @ $12.00 ($3,600) = $4,600.

Why B is correct:

• FIFO definition requires selling earliest purchases first, leaving a mix of remaining original stock and final purchase for closing inventory valuation.

Why the others are wrong:

• A assumes all oldest opening stock remains (LIFO method).
• C overvalues by incorrectly assigning higher average costs to all 400 units.
• D inflates by applying $12.00 to more than the August purchase quantity.

Final answer: B