Question

The following units of an inventory item were available for sale during the year:Beginning inventory 10 units at $55First purchase 25 units at $60Second purchase 30 units at $65Third purchase 15 units at $70The firm uses the periodic inventory system. During the year, 60 units of the item were sold.The value of ending inventory using LIFO is:
$1,250$1,350$1,375$1,150

Answer 1

Answer:

$1150.

Explanation:

Given: Beginning inventory 10 units at $55

          First purchase 25 units at $60

          Second purchase 30 units at $65

          Third purchase 15 units at $70.

First, lets calculate total units of inventory available.

Total inventory available for sales during the year= $(10+25+30+15)= 80\ units$

∴ Total inventory available for sales during the year= 80 units

As given 60 units were sold out of total 80 units.

$80-60= 20\ units$

∴ 20 units of inventory is still remaining.

To determine the cost of unit sold, under LIFO accounting, you start with assumption that you have sold the most recent inventory and work backward.

As 20 units is still available after selling 60 units.

∴ The value of ending inventory= $(10\ units \times \ 60 + 10\ units \times \ 55)$

The value of ending inventory= $\ 600+\ 550= \ 1150$

∴ The value of ending inventory using LIFO is $1150.