Question

Inventory information for Part 311 of Chi Corp. discloses the following information for the month of June (beginning balance of the month =0):

June 1. Purchased 600 units @ $16

June 11. Purchased 800 units @ $19

June 15. Sold 300 units @ $40

June 20. Purchased 600 units @ $21

June 27. Sold 200 units @ $43

a) If Chi Corp. uses LIFO and Perpetual system, then, what is the unit cost of the inventories sold on June 15? Why?

b) If Chi Corp. uses LIFO and Periodic system, then, what is the unit cost of the inventories sold on June 15? Why?

c) Calculate the total quantity (in units) of goods available for sale, and (in units) ending inventory – do NOT compute total value of ending inventory balance. Show your calculation.

Compute cost of goods available for sale (in USD). Show your calculation.

Answer 1

LIFO method states that the goods purchased later will be sold first

Under periodic method, the records are updated at the end of the period.

The records are updated after each transaction under perpetual method

a)Unit cost of inventory sold on June 15 = $19, i.e. last purchased rate

b)Unit cost = $21, since all transactions will be recorded at the end of the month and hence, latest buy rate = $21 per unit

c)Units available for sale = 600+800+600 = 2,000 units

Units in ending inventory = 2000-300-200 = 1,500 units

Cost of Goods available for sale = 600*16 + 800*19 + 600*21 = $37,400