Question

Inventory purchase and sales data are as follows. [Note: There was no inventory before the purchase...

Inventory purchase and sales data are as follows. [Note: There was no inventory before the purchase made on January 1.]
 
Purchased on January 1 -- 300 units, $7 cost per unit
Purchased on January 16 -- 600 units, $10 cost per unit
Purchased on January 25 -- 400 units, $9 cost per unit
 
Sold on January 31 -- 500 units, $15 selling price per unit
 
Assume that the company uses LIFO. Compute ENDING INVENTORY for January. Write the dollar amount of your answer. (Do not write the dollar sign).
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Answer #1

Number of units available for sale = 300 + 600 + 400 = 1,300

Units in ending inventory = Number of units available for sale - Units sold

= 1,300 - 500

= 800

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.

800 units in ending inventory consists of 300 units from January 1 purchases and 500 units from January 16 purchases.

Ending inventory = (300 * $7) + (500 * $10)

= $2,100 + $5,000

= $7,100

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