Question

The following units of an item were available for sale during the year:

Beginning inventory	20 units @ $42
Sale	17 units @ $61
First purchase	24 units @ $43
Sale	21 units @ $62
Second purchase	30 units @ $45
Sale	14 units @ $63

The firm uses the perpetual inventory system, and there are 22 units of the item on hand at the end of the year.

a. What is the total cost of the ending inventory according to FIFO?
$fill in the blank 1

b. What is the total cost of the ending inventory according to LIFO?
$fill in the blank 2

Answer 1

Beginning inventory		20 units @$42
Sale	17 units @$42	3 units @$42
First purchase	24 units @$43	3 units @$42 24 units @$43
Sale	3 units @$42 18 units @$43	6 units @$43
Second purchase	30 units @$45	6 units @$43 30 units @$45
Sale	6 units @$43 8 units @$45	22 units @$45

Cost of ending inventory under FIFO = 22 units x $45 = $990

Beginning inventory		20 units @$42
Sale	17 units @$42	3 units @$42
First purchase	24 units @$43	3 units @$42 24 units @$43
Sale	21 units @$43	3 units @$42 3 units @$43
Second purchase	30 units @$45	3 units @$42 3 units @$43 30 units @$45
Sale	14 units @$45	3 units @$42 3 units @$43 16 units @$45

Ending inventory under LIFO method = 3 units x $42 + 3 units x $43 + 16 units x $45 = $126 + $129 + $720 = $975