Question

Lowell Inc. had the following inventory in fiscal 2012. The company uses the LIFO method of accounting for inventory.

Beginning Inventory, August 1, 2011: 140 units @ $19.50
Purchase 300 units @ $19.00
Purchase 50 units @ $20.00
Purchase 120 units @ $20.30
Ending Inventory, July 31, 2012: 120 units

The company's cost of goods sold for fiscal 2012 is:

	A.	$ 9,526
	B.	$ 2,636
	C.	$11,866
	D.	$ 9,331
	E.	None of the above

Answer 1

The cost of goods sold is computed as follows:

Number of units sold is computed as follows:

= Opening inventory + Purchases - Ending Inventory

= 140 + 300 + 50 + 120 - 120

= 490 units

So, the cost on the basis of LIFO will be as follows:

= 120 units x $ 20.30 + 50 units x $ 20 + 300 units x $ 19 + Remaining units out of 490 units i.e. (490 - 120 - 50 - 300) 20 units x $ 19.50

= $ 2,436 + $ 1,000 + $ 5,700 + $ 390

= $ 9,526

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