Question

FIFO and LIFO Costs Under Perpetual Inventory System

The following units of an item were available for sale during the year:

Beginning inventory	38 units at $45
Sale	28 units at $70
First purchase	29 units at $48
Sale	10 units at $70
Second purchase	28 units at $50
Sale	43 units at $72

The firm uses the perpetual inventory system, and there are 14 units of the item on hand at the end of the year.

a. What is the total cost of the ending inventory according to FIFO?
$

b. What is the total cost of the ending inventory according to LIFO?
$

Answer 1

Ans. A	FIFO :
	Purchase				Cost of goods sold			Balance
	Transaction	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	Beginning inventory							38	$45.00	$1,710
	Sales				28	$45.00	$1,260	10	$45.00	$450
	First purchase	29	$48.00	$1,392				10	$45.00	$450
								29	$48.00	$1,392
	Sales				10	$45.00	$450	29	$48.00	$1,392
	Second purchase	28	$50.00	$1,400				29	$48.00	$1,392
								28	$50.00	$1,400
	Sales				29	$48.00	$1,392
					14	$50.00	$700	14	$50.00	$700
	Total				Cost of goods sold		$3,802	Ending inventory		$700
	*In FIFO method the units that have purchased first are released the first one.
Ans. B	Perpetual LIFO:
	Purchase				Cost of goods sold			Balance
	Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	Beginning inventory							38	$45.00	$1,710
	Sales				28	$45.00	$1,260	10	$45.00	$450
	First purchase	29	$48.00	$1,392				10	$45.00	$450
								29	$48.00	$1,392
	Sales				10	$48.00	$480	10	$45.00	$450
								19	$48.00	$912
	Second purchase	28	$50.00	$1,400				10	$45.00	$450
								19	$48.00	$912
								28	$50.00	$1,400
	Sales				28	$50.00	$1,400
					15	$48.00	$720	10	$45.00	$450
								4	$48.00	$192
	Total				Cost of goods sold		$3,860	Ending inventory		$642
	*In LIFO method the units that have purchased last, are released the first one.