Question

The following lots of a particular commodity were available for sale during the year: Beginning inventory 5 units at $61 First purchase 15 units at $63 Second purchase 10 units at $74 Third purchase 10 units at $77 The firm uses the periodic system, and there are 20 units of the commodity on hand at the end of the year. What is the amount of cost of merchandise sold for the year according to the LIFO method?
a.$1,510
b.$1,375
c.$1,380
d.$1,250

Answer 1

Answer: Option (a) is correct.

Explanation:

Given that,

Beginning inventory = 5 units at $61

First purchase = 15 units at $63

Second purchase = 10 units at $74

Third purchase = 10 units at $77

Ending inventory = Beginning inventory × $61 + First purchase × $63

                            = 5 units × $61 + 15 units × $63

                            = $1,250

Cost of goods sold = Second purchase × $74 + Third purchase × $77

                                = 10 units × $74 + 10 units × $77

                                = $1,510