A company had the following purchases and sales during its first year of operati
ID: 2597411 • Letter: A
Question
A company had the following purchases and sales during its first year of operations: January: February: May: September: November: Purchases 10 units at $1206 units 20 units at $1255 units 15 units at $1309 units 12 units at $1358 units 10 units at $140 13 units On December 31, there were 26 units remaining in ending inventory. Using the Periodic LIFO inventory valuation method, what is the cost of the ending inventory? (Assume all sales were made on the last day of the month.) 20). A) $3,270. B) $5,400. C) $3,405. D) $3,200. E) $3,364.Explanation / Answer
Answer
D. $ 3,200
Working Notes
LIFO Perpetual inventory system
Month
Purchase
Sales
Balance
Quantity
Price ($)
Value ($)
Quantity
Price ($)
Quantity
Price ($)
Value ($)
January
10
120
1,200
-
-
10
120
1,200
February
20
125
2,500
-
-
10
20
120
125
1,200
2,500
May
15
130
1,950
-
-
10
20
15
120
125
130
1,200
2,500
1,950
September
12
135
1,620
-
-
10
20
15
12
120
125
130
135
1,200
2,500
1,950
1,620
November
10
140
1,400
-
-
10
20
15
12
10
120
125
130
135
140
1,200
2,500
1,950
1,620
1,400
December*
-
-
-
10
12
15
4
140
135
130
125
10
16
120
125
1,200
2,000
*Cost of ending inventory = $ (120 X 10) + (125 X 16)
= $ 1,200 + 2,000
= $ 3,200
According to LIFO method, the inventories first sold will be of November, followed by September, May and February.
As the closing inventory units are 26, only 4 units from February units will be sold. So, as to have 26 units in hand.
Month
Purchase
Sales
Balance
Quantity
Price ($)
Value ($)
Quantity
Price ($)
Quantity
Price ($)
Value ($)
January
10
120
1,200
-
-
10
120
1,200
February
20
125
2,500
-
-
10
20
120
125
1,200
2,500
May
15
130
1,950
-
-
10
20
15
120
125
130
1,200
2,500
1,950
September
12
135
1,620
-
-
10
20
15
12
120
125
130
135
1,200
2,500
1,950
1,620
November
10
140
1,400
-
-
10
20
15
12
10
120
125
130
135
140
1,200
2,500
1,950
1,620
1,400
December*
-
-
-
10
12
15
4
140
135
130
125
10
16
120
125
1,200
2,000
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