Question

Inventory Costing Methods and the Periodic Method Lambeth Company experienced the following events in February: Date Event Units Unit Cost Total Cost Feb. 1 Purchased inventory 100 @ $20 $2,000 Feb. 4 Sold inventory 50 Feb. 9 Purchased inventory 100 @ 22 $2,200 Feb. 27 Sold inventory 100 If the Lambeth Company uses the LIFO inventory costing method, calculate the company’s cost of goods sold and ending inventory as of February 28 assuming the periodic method. Cost of goods sold $Answer Ending inventory

Answer 1

Answer:

Closing Inventory :       $ 1,000

Cost of Goods Sold:     $ 3,200

Explanation:

The inventory balance as at February 28  is 50 units. This is calculated by adding the total purchases of 100 on February 01 and 100 on February 9 reduced by the sales of 50 units on February 4 and 100 units on Feb 27.

In a LIFO costing method, the last purchased inventory is costed first hence the term Last In First Out (LIFO). The inventory balance of  50 units shall be valued from the first purchase @ $ 20. Thus the inventory value is $ 1000. ( $ 20 x 50 units)        

For the cost of goods sold of the units sold aggregating to 150 units, the last purchased units will be considered first and then the remaining shall be considered from the first purchase.

Computation of cost of goods sold

100 units @ $ 22                                               $ 2,200

50 units  @$  20                                               $  1,000

Total Cost of goods sold  for 150 sold units   $ 3,200