Question

Perpetual Inventory Using LIFO

Beginning inventory, purchases, and sales for Item HM46 are as follows:

March 1		Inventory	94 units @ $25
5		Sale	75 units
11		Purchase	104 units @ $27
21		Sale	87 units

Assuming a perpetual inventory system and using the last-in, first-out (LIFO) method, determine (a) the cost of merchandise sold on March 21 and (b) the inventory on March 31.

a. Cost of merchandise sold on March 21	$
b. Inventory on March 31	$

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.

Date	Particulars	Cost of units purchased	Cost of units sold	Ending inventory
March 1	Beginning inventory			94*$25 = $2,350
March 5	Sale		75*$25 = $1,875	19*$25 = $475
March 11	Purchase	104*$27 = $2,808		19*$25 = $475 104*$27 = $2,808
March 21	Sale		87*$27 = $2,349	19*$25 = $475 17*$27 = $459

a. Cost of merchandise sold on March 21	$2,349
b. Inventory on March 31	$934 ($475+$459)