Question

THE Company employs a periodic inventory system and
sells its inventory to customers for $10 per unit.
THE Company had the following inventory information
available for the month of May:

May 1    Beginning inventory 280 units @ $3.80 cost
         per unit
May 6    Purchased 350 units @ $4.90 cost per unit
May 8    Purchased 240 units @ $4.10 cost per unit
May 14   Sold 410 units
May 19   Purchased 400 units @ $5.75 cost per unit
May 23   Sold 270 units
May 27   Sold 120 units
May 29   Purchased 230 units @ $3.90 cost per unit

The amount of cost of goods sold reported on THE
Company's income statement for May using the LIFO
method was equal to:

Answer 1

Under the Last in first out (LIFO) method of inventory valuation, Cost of goods sold consists of the units from recent purchases. Ending inventory consists of the units from beginning inventory and earliest purchases.

Total units sold = 410 + 270 + 120 = 800

800 units sold consists of 230 units from May 29 purchases, 400 units from May 19 purchases and 170 units from May 8 purchases.

Cost of goods sold = (230 * $3.9) + (400 * $5.75) + (170 * $4.1)

= $897 + $2,300 + $697

= $3,894