Question

Fulbright Corp. uses the periodic inventory system. During its first year of operations, Fulbright made the following purchases (listed in chronological order of acquisition): 53 units at $139 per unit 135 units at $142 per unit 183 units at $122 per unit Sales for the year totaled 335 units, leaving 36 units on hand at the end of the year. In comparing the ending inventory balances of FIFO and LIFO, the ending inventory value under FIFO less the ending inventory balance under LIFO results in a difference of:

Answer 1

Answer:

The difference is $612

Explanation:

By using the Periodic inventory system Fulbright Corp. calculates its Cost of Sales and Inventory at the end of a certain period. In this case at year end.

FIFO

FIFO assumes that the units to arrive first will be sold first. Meaning inventory will be valued using recent prices.

FIFO inventory = 36 units x $122 = $4,392

LIFO

LIFO assumes that the units to arrive last will be sold first. Meaning that the inventory will be valued using earliest (old) prices.

LIFO inventory = 36 units x $139 = $5,004

Conclusion

Difference = LIFO inventory - FIFO inventory

                  = $5,004 - $4,392

                  = $612