Perpetual Inventory Using LIFO Beginning inventory, purchases, and sales data fo
ID: 2470612 • Letter: P
Question
Perpetual Inventory Using LIFO
Beginning inventory, purchases, and sales data for prepaid cell phones for July are as follows:
a. Assuming that the perpetual inventory system is used, costing by the LIFO method, determine the cost of merchandise sold for each sale and the inventory balance after each sale.
b. Based upon the preceding data, would you expect the inventory to be higher or lower using the first-in, first-out method?
Inventory Purchases Sales July 1 3,700 units at $28 July 10 1,850 units at $30 July 12 2,590 units July 20 1,665 units at $32 July 14 2,220 units July 31 1,110 unitsExplanation / Answer
In LIFO method, Clsoing stock is from the earliest inventory and the inventory entered in the last is used first in production. So the calculation of cost of goods sold and closing inventory is as follows:
Purchaes
unit cost
Cost of merchandise sold
unit cost
Cost of merchandise sold
Total Cost
Inventory cost
Unit Cost
b, In FIFO bases the clsoing inventory is from the latest stock. As evident from above the latest goods are expensive than the previous goods. So inventory would be higher in FIFO method
date Quantity PurchasedPurchaes
unit cost
Total Purchase Cost Quantity SoldCost of merchandise sold
unit cost
Cost of merchandise sold
Total Cost
Inventory quantityInventory cost
Unit Cost
Total inventory cost 1 july 3700 28 103600 10 july 1850 30 55500 3700 28 103600 1850 30 55500 12 july 1850 30 55500 740 28 20720 2960 28 82880 14 july 2220 28 62160 740 28 20720 20 july 1665 32 53280 740 28 20720 1665 32 53280 31 july 1110 32 35520 740 28 20720 555 32 17760 Total 173900 38480Related Questions
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