Question

The following units of an item were available for sale during the year:
Beginning Invetory 3,600 units at $4.00

Sale 2,400 units at $8.00

First Purchase 8,000 units at $4.20

Sale 6,000 units at $8.00

Second Purchase 7,500 units at $4.40

Sale 5,500 units at $8.00

the firm uses the perpetual invetory system, and there are 5,200 units of the item on hand at the end of the year. What is the total cost of the ending inventory according to A) FIFO and B) LIFO

Answer 1

A) Beginning Invetory 3,600 units at $4.00
B) Sale 2,400 units at $8.00
C) First Purchase 8,000 units at $4.20
D) Sale 6,000 units at $8.00
E) Second Purchase 7,500 units at $4.40
F) Sale 5,500 units at $8.00
In FIFO method, the units which we purchased first will go for sales irrespective of latest purchase.. i.e., First in first out
A) Perpetual FIFo :
	Purchases			Sales			Balance inventory
Date	Quantity	Rate	Amount	Quantity	Rate	Amount	Quantity	Rate	Amount
A							3600	4	14400
B				2400	4	9600	1200	4	4800
C	8000	4.2	33600				1200	4	4800
							8000	4.2	33600
D				1200	4	4800	0	4	0
				4800	4.2	20160	3200	4.2	13440
E	7500	4.4	33000				3200	4.2	13440
							7500	4.4	33000
F				3200	4.2	13440	0	4.2	0
				2300	4.4	10120	5200	4.4	22880
				Total cost of ending inventory			5200		22880
In LIFO , the units we purchased last i.e., latest will go for sale irrespective of the first purchase , i.e., last in first out..
B) Perpetual LIFo :
	Purchases			Sales			Balance inventory
Date	Quantity	Rate	Amount	Quantity	Rate	Amount	Quantity	Rate	Amount
A							3600	4	14400
B				2400	4	9600	1200	4	4800
C	8000	4.2	33600				1200	4	4800
							8000	4.2	33600
D				6000	4.2	25200	1200	4	4800
							2000	4.2	8400
E	7500	4.4	33000				1200	4	4800
							2000	4.2	8400
							7500	4.4	33000
F				5500	4.4	24200	1200	4	4800
							2000	4.2	8400
							2000	4.4	8800
				Total cost of ending inventory			5200		22000