BAF Company uses a periodic inventory system and its inventory records for June

Question

BAF Company uses a periodic inventory system and its inventory records for June contain the following information:

The company sold 1,000 units during June and 500 units were in its ending inventory on June 30.


If the company uses the LIFO costing method, what is the amount reported in its ending inventory?

$1,366.

$1,494.

$1,650.

$2,836

Beginning Inventory: 300 units @ $2.60 = $ 780 Purchased on June 10 : 400 units @ $2.93 = $ 1,172 Purchased on June 15 : 500 units @ $2.52 = $ 1,260 Purchased on June 28 : 300 units @ $3.30 = $ 990

Explanation / Answer

Under LIFO (Last In First Out) method of inventory valuation, Inventory is valued from the oldest purchases and cost of goods sold consists of latest inventory

So, 500 units of ending inventory will be valued as follows

300 units from Beginning Inventory + 200 units from Purchased on June 10

= 300 x $2.60 + 200 x $2.93

= $1,366

So, option a is the correct option

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