Question

Gonzales Inc. uses a periodic inventory system. On March 31, Gonzales has two plasma TVs on hand at a cost of $1,500 each (serial numbers 1534892 and 1534894). In April, Gonzales purchases four more identical TVs from Toshiba for $1,450 each (serial numbers 1542631 through 1542634). In May, Gonzales purchases five more identical TVs for $1,600 each (serial numbers 1550964 through 1550968). In June, Gonzales sells two of these TVs (serial numbers 1534894 and 1542631). There were no additional purchases or sales during the remainder of the year. Gonzales Inc. What is the cost of its ending inventory under LIFO and FIFO?

Answer 1

Beginning inventory unit	2
(+) Purchased in April	4
(+) Purchased in May	5
(-) Sold in June	2
Énding inventory units	9

First-in, first-out (FIFO) : In this method those goods are sold first which are purchased first and the ending inventory is from the latest purchases.
Cost of ending inventory = (5*1600) + (4*1450) = 13800
Last-in, first-out (LIFO) : In this method those goods are sold first which are purchased last ( i.e. recently ) and the endign inventory is from beginning inventory and ealier purchases.
Cost of ending inventory = (2*1500) + (4*1450) + (3*1600) = 13600