Question

On January 1, 2016 Oxford Company had 3,500 units in inventory at a cost of $9 per unit.  During 2016 Oxford company purchased 3,000 units (Lot #1 - the first units purchased during the year) at a cost of $9.50 per unit, 4,000 units (Lot #2) at a cost of $10.50 per unit and 2,500 units (Lot #3) at a cost of $10 per unit.  The company sold 8,700 units during 2016 at a sales price of $12.25 per unit.  If Oxford Company uses a periodic inventory system and the last-in-last-out (LIFO) method, then what is the company's ending inventory for December 31, 2016?

Answer 1

Ending inventory=Beginning inventory+Purchases-Sales

=3500+3000+4000+2500-8700

=4300 units

As per LIFO;ending inventory=(3500 units@$9)+(800 units@$9.5)

=$39100

NOTE:As per LIFO;goods purchased last are sold off first.Hence 8700 units sold would consist of 2500 units of Lot 3;4000 units of Lot 2 and the balance=(8700-2500-4000)=2200 units of Lot 1.

Hence ending inventory would consist of (3000-2200)=800 units of Lot 1. and (4300-800)=3500 units of beginning inventory.