Question

The following is a record of Wildhorse Company’s transactions for Boston Teapots for the month of May 2020.

May 1

Balance

472 units

@

$20.00

May 10

Sale

354 units

@

$36.00

12

Purchase

708 units

@

$27.00

20

Sale

637 units

@

$36.00

28

Purchase

472 units

@

$29.00

Assuming that perpetual inventories are not maintained and that a physical count at the end of the month shows 661 units on hand, what is the cost of the ending inventory using (1) FIFO and (2) LIFO?

		(1) FIFO		(2) LIFO
Ending Inventory		$

Answer 1

In FIFO method, inventory first purchased is assumed to be sold first i.e., ending inventory will consist of inventory purchased in the ending (latest purchase).

In LIFO method, inventory last purchased is assumed to be sold first i.e., ending inventory will consist of inventory purchased in the beginning (old purchase).

(1) Ending inventory (FIFO) = $ 18,791

(2) Ending inventory (LIFO) = $ 14,543