Question

15 a. Clancy, Inc. has the following inventory information.

                  July 1             Beginning Inventory               20 units at $90

                          5            Purchases                                120 units at $92

                        14            Sale                                         90 units

                        21            Purchases                                60 units at $95

                        30            Sale                                         58 units

Assuming that a perpetual inventory system is used, what is the ending inventory on a FIFO basis?

$4,744

$5,860

$4,940

$6,346

Clancy has the following inventory information.

                  July 1             Beginning Inventory               20 units at $90

                          5            Purchases                                120 units at $92

                        14            Sale                                         90 units

                        21            Purchases                                60 units at $95

                        30            Sale                                         58 units

Assuming that a perpetual inventory system is used, what is the ending inventory on a LIFO basis?

a. $4,744

b.$4,750

c.$4,940

d.$4,790

15b. For the Desai Corporation, units of an item available for sale during the year were as follows:

                 Nov. 1             Inventory                 30 units @ $80 = $ 2,400

                          8            Purchase               120 units @ $83 = $ 9,960

                        17            Purchase                 60 units @ $87 = $ 5,220

                        25            Purchase                 90 units @ $88 = $ 7,920

                                                                      300 units

There are 42 units of the item in the ending physical inventory at December 31. The periodic inventory system is used. Determine the dollar value of the 42 units of the ending inventory by (a) the FIFO (first-in, first-out) method, (b) the LIFO (last-in, first-out) method, and (c) the Average Cost method. Please show your work.

Answer 1

Part (15a)	Ending inventory units = (20+120-90+60-58) = 52 units
	First-in-First-out (FIFO):-
	Under this method,52 units left means it must be left from the last unit purchases since the units from the starting must have been sold
	Ending Inventory			July 21	52	95	4,940
					52		4,940
	Last-in-First-out LIFO):-
	Under this method,52 units left means it must be left from the beginning inventory and the 1st purchases unit and if required from thereafter and so on since the units sold will initiate from the last purchases.
	Ending Inventory		(2,240-2,040)	July 1	20	90	1,800
				July 5	32	92	2,944
					52		4,744
Part (15b)	First-in-First-out (FIFO):-
	Under this method,42 units left means it must be left from the last unit purchases since the units from the starting must have been sold
	Ending Inventory			July 25	42	88	3,696
					42		3,696
	Last-in-First-out LIFO):-
	Under this method,42 units left means it must be left from the beginning inventory and the 1st purchases unit and if required from thereafter and so on since the units sold will initiate from the last purchases.
	Ending Inventory			Nov 1	30	80	2,400
				Nov 8	12	83	996
					42		3,396
	Average Cost method:-
	Average cost
		Nov 1	30	80	2,400
		Nov 8	120	83	9,960
		Nov 17	60	87	5,220
		Nov 25	90	88	7,920
			300		25,500
	Average cost = (25,500/300) = 85
	Ending inventory = (85*42) = 3,570