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FIFO and LIFO Costs Under Perpetual Inventory System The following units of an item were available...
FIFO and LIFO Costs Under Perpetual Inventory System
The following units of an item were available for sale during the year:
| Beginning inventory | 45 units at $42 |
| Sale | 42 units at $59 |
| First purchase | 27 units at $44 |
| Sale | 15 units at $61 |
| Second purchase | 24 units at $46 |
| Sale | 20 units at $62 |
The firm uses the perpetual inventory system, and there are 19 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?
Solutions
Expert Solution
| FIFO METHOD | PURHASES | COST OF GOODS SOLD | CLOSING BALANCE | |||||||
| Date | Particulars | Units | Rate | Total Cost | Units | Rate | Total Cost | Units | Rate | Total Cost |
| ------- | Beginning inventory | 45 | $ 42 | $ 1,890 | ||||||
| ------- | Sale | 42 | $ 42 | $ 1,764 | 3 | $ 42 | $ 126 | |||
| ------- | First Purchases | 27 | $ 44 | $ 1,188 | 3 | $ 42 | $ 126 | |||
| 27 | $ 44 | $ 1,188 | ||||||||
| ------- | Sale | 3 | $ 42 | $ 126 | ||||||
| 12 | $ 44 | $ 528 | 15 | $ 44 | $ 660 | |||||
| ------- | Second Purchases | 24 | $ 46 | $ 1,104 | 15 | $ 44 | $ 660 | |||
| 24 | $ 46 | $ 1,104 | ||||||||
| ------- | Sale | 15 | $ 44 | $ 660 | ||||||
| 5 | $ 46 | $ 230 | 19 | $ 46 | $ 874 | |||||
| Total | 51 | $2,292 | 77 | $3,308 | 19 | $ 874 | ||||
| Answer = Ending Inventory = $ 874 | ||||||||||
| LIFO METHOD | PURHASES | COST OF GOODS SOLD | CLOSING BALANCE | |||||||
| Date | Particulars | Units | Rate | Total Cost | Units | Rate | Total Cost | Units | Rate | Total Cost |
| ------- | Beginning inventory | 45 | $ 42 | $ 1,890 | ||||||
| ------- | Sale | 42 | $ 42 | $ 1,764 | 3 | $ 42 | $ 126 | |||
| ------- | First Purchases | 27 | $ 44 | $ 1,188 | 3 | $ 42 | $ 126 | |||
| 27 | $ 44 | $ 1,188 | ||||||||
| ------- | Sale | 15 | $ 44 | $ 660 | 3 | $ 42 | $ 126 | |||
| 12 | $ 44 | $ 528 | ||||||||
| ------- | Second Purchases | 24 | $ 46 | $ 1,104 | 3 | $ 42 | $ 126 | |||
| 12 | $ 44 | $ 528 | ||||||||
| 24 | $ 46 | $ 1,104 | ||||||||
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