Question

In its first month of operations, Blue Spruce Corp. made three purchases of merchandise in the following sequence: (1) 200 units at $5, (2) 600 units at $6, and (3) 145 units at $7. Assuming there are 290 units on hand, compute the cost of the ending inventory under the (a) FIFO method and (b) LIFO method. Blue Spruce uses a periodic inventory system.

Answer 1

Answer:

(1) $1,885

(2) $1,540

Explanation:

Given the following sequence:

200 units at $5, 600 units at $6 and 145 units at $7

Ending inventory = 290 units

(1) FIFO method

Cost of ending Inventory:

= 145 units at $7 + 145 units at $6

= 145 × $7 + 145 × $6

= 1,015 + 870

= $1,885

(2) LIFO method

Cost of ending Inventory:

= 200 units at $5 + 90 units at $6

= 200 × $5 + 90 × $6

= 1,000 + 540

= $1,540