Question

The beginning inventory for ProKnows Ltd. consisted of 20 units at $4 each. During March, 40 more units of inventory were purchased for $5 each, and during May, an additional 40 units were purchased for $6 each. A total of 70 units of inventory were sold during the year. Under the LIFO cost flow assumption, ending inventory:

Answer 1

Answer:

The answer is $130

Explanation:

LIFO - Last in First out. Under this assumption, the inventory that was bought last will be sold last. So the ending inventory will be the inventory that was bought earliest.

Beginning inventory 20 units at $4 each

First purchase 40 units at $5

2nd purchase 40 units at $6

Sales 70 units

So under LIFO;

40 units that was purchased last will first go. The cost is 40 x $6= $240

30 units out of the second purchase of 40units will be sold(remaining 10). The cost is 30 x 5 = $150.

So the cost of goods sold is $240 + $150 = $390.

Ending inventories are what is remaining after 70units had been sold.

10 out of the second purchase is remaining. The cost is 10 x 5 = $50

Opening inventory is remaining too. The cost is 20 x 4 = $80.

Therefore, the ending inventory is

$50 + $80

=$130