Question

Transactions for the month of June were:

Purchases	Sales
June 1 (balance) 800 at 3.20	June 2 ….600 at $5.50
3…………………….2,200 at 3.10	6………..1,600 at 5.50
7…………………….1,200 at 3.30	9…………1,000 at 5.50
15…………………..1,800 at 3.40	10……….. 400 at 6.00
22……………………..500 at 3.50	18………..1.400 at 6.00
…………………………………………………	25…………..200 at 6.00

Assuming that periodic inventory system is adopted, the ending inventory on a LIFO basic is?

Answer 1

Number of units available for sale = Beginning inventory + Purchases

= 800 + 2,200 + 1,200 + 1,800 + 500

= 6,500

Sales in units = 600 + 1,600 + 1,000 + 400 + 1,400 + 200

= 5,200

Units in ending inventory = Number of units available for sale - Sales in units

= 6,500 - 5,200

= 1,300

Under the Last in first out (LIFO) method of inventory valuation, Cost of goods sold consists of the units from recent purchases. Ending inventory consists of the units from beginning inventory and earliest purchases.

1,300 units in ending inventory consists of 800 units from beginning inventory and 500 units from June 3 purchases.

Ending inventory = (800 units * $3.2) + (500 units * $3.1)

= $2,560 + $1,550

= $4,110