Question

Ayayai Corp. has the following inventory data:

July 1		Beginning inventory		28 units at $18		$504
7		Purchases		99 units at $19		1881
22		Purchases		14 units at $21		294
						$2679

A physical count of merchandise inventory on July 30 reveals that there are 45 units on hand. Using the LIFO inventory method, the amount allocated to ending inventory for July is

$827.

$810.

$855.

$945.

Answer 1

Facts of the Question:

Date	Details	Number of Units	Cost per unit (In $)	Total Cost (In $)
July'1	Beginning Inventory	28	18.00	504
July'7	Purchases	99	19.00	1,881
July'22	Purchases	14	21.00	294
Total		141		2,679

Answer)

Under LIFO method, using periodic inventory system, value of inventory is calculated on the assumption that units of inventory which are latest bought will be sold first. Accordingly, ending inventory will be from the earliest bought units and moving forwards.

In the given question, the company had 45 units in ending inventory. Out of these 45 units, 28 units will be from the beginning inventory on July’1 @ $ 18 per unit and balance 17 units will be units purchased on July’7 @ $ 19 per unit.

Value of ending inventory = (28 units X $ 18 per unit) + (17 units X $ 19 per unit)

                                                 = $ 504 + $ 323

                                                 = $ 827.

Therefore the value of inventory using LIFO method is $ 827.