Question

Rally Wheels Company had the following balances and transactions during? 2018:

Beginning Merchandise Inventory as of January? 1, 2018	320 units at $75
March 10	Sold 80 units
June 10	Purchased 1,280 units at$79
October 30	Sold 125 units

What would the? company's ending merchandise inventory cost be on December? 31, 2018 if the perpetual inventory system and the last??in, first?out inventory costing method are? used?

A.

$125,120

B.

$15,875

C.

$101,120

D.

$109,245

Answer 1

Under LIFO method, latest Inventory purchased is issued first to sales and closing inventory is from units remaining after issue of inventory

80 units sold on March 10 will be issued from Beginning Merchandise Inventory as of January? 1, 2018

So, remaining Inventory out of Beginning Merchandise Inventory as of January? 1, 2018

= (320 – 80) x $75

= $ 18,000 --------------- (1)

125 units sold on October 30 will be issued from June 10 purchases

So, remaining Inventory

= (1,280 – 125) x $79

= $ 91,245 ----------------(2)

So, Value of closing Inventory

= (1) + (2)

= $ 18,000 + $ 91,245

= $109,245

So, as per above calculations, option D is the correct option