Question

FIFO and LIFO Costs Under Perpetual Inventory System

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

Beginning inventory	47 units at $44
Sale	16 units at $62
First purchase	24 units at $47
Sale	30 units at $62
Second purchase	19 units at $50
Sale	10 units at $62

The firm uses the perpetual inventory system, and there are 34 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

(a) Perpetual FIFO :								(Amount in $)
Date	Purchases			Sales			Balance
	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount
Beginning							47	44	2068
Sale				16	44	704	31	44	1364
first purchase	24	47	1128				31	44	1364
							24	47	1128
Sale				30	44	1320	1	44	44
							24	47	1128
Second purchase	19	50	950				1	44	44
							24	47	1128
							19	50	950
Sale				1	44	44	0	44	0
				9	47	423	15	47	705
							19	50	950
Total				56		2491	34		1655
Under perpetual FIFO, First in first out method the goods which came into godown first are sold first ie., irrespective of latest purchase..beginning inventory and then first purchase goods will be sold.
Total ending inventory	34 units
Cost of ending inventory	$1,655
(b) Perpetual LIFO								(Amount in $)
Date	Purchases			Sales			Balance
	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount
Beginning							47	44	2068
Sale				16	44	704	31	44	1364
first purchase	24	47	1128				31	44	1364
							24	47	1128
sale				24	47	1128	25	44	1100
				6	44	264	0	47	0
Second purchase	19	50	950				25	44	1100
							0	47	0
							19	50	950
Sale				10	50	500	25	44	1100
							0	47	0
							9	50	450
Total				56		2596	34		1550
Under perpetual LIFO, I.e., last in first out the latest goods which are purchased that comes into godown will be sold first irrespective of the stock that was already there.
Total ending inventory	34 units
Cost of ending inventory	$1,550