Question

Ace Systems, Inc. uses a perpetual inventory system. The company’s beginning inventory of a particular product and its purchases during the month of January were as follows: Quantity Unit Cost Total Cost Beginning inventory (Jan. 1)..................... 10 $27.50 $275 Purchase (Jan. 15)...................................... 15 $28.00 $420 Purchase (Jan. 23)...................................... _5 $29.00 $145 Total...................................................... 30 $840 On January 28, Ace Systems sells 18 units of this product. The other 12 units remain in inventory at January 31. Assuming that Ace Systems uses the LIFO flow assump­tion, the 12 units of this product in inventory at January 31 have a total cost of:

$336

$502

$331

$499

Answer 1

Given Information:

	Units	Cost per unit	Total Cost
Beginning Inventory (Jan. 1)	10 units	$27.50	$275
Purchase (Jan. 15)	15 units	$28	$420
Purchase (Jan. 23)	5 units	$29	$145
Total	30 units		$840

On Jan. 28 Ace Systems sells 18 units of this product. Ace Systems uses (Last in First Out) LIFO inventory valuation. It means that inventory that has brought recently will be sold first.

18 units has been sold as follows:

5 units are sold from Jan. 23 Purchase and 13 units are sold from Jan. 15 Purachases.

Cost of finished goods inventory at Jan. 31 will be:

Beginning inventory = 10 units @ $27.50 = $275

Jan. 15 Purchase = 2 units @ $28 = $56

Total cost of finished good inventory at Jan. 31 = $275 + $56 = $331.

Therefore the correct answer is $331.