Question

The Xu Corporation uses a periodic inventory system. The company has a beginning inventory of 950 units at $12 each on January 1. Xu purchases 1,200 units at $11 each in February and 550 units at $13 each in March. There were no additional purchases or sales during the remainder of the year. Xu sells 1,000 units during the quarter. If Xu uses the LIFO method, what is its cost of goods sold

Answer 1

Answer: $12,100

Explanation:

A company using Last In First Out (LIFO) sells the inventory that they acquire the most recently first and then later inventory are then sold.

Xu Corporation had,

a. Opening Balance in Januray of 950 units at $12

b. February Purchases were 1,200 units at $11

c. March Purchases were 550 at $13

Xu sold 1,000 units during the year which means all 550 units bought in March were sold.

The remaining 450 units were acquired from the February purchases at $11.

Cost of Goods sold is,

= (550 * 13) + (450 * 11)

= 7,150 + 4,950

= $12,100