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In: Accounting

A company purchased 400 units for $20 each on January 31. It purchased 400 units for...

A company purchased 400 units for $20 each on January 31. It purchased 400 units for $40 each on February 28. It sold a total of 450 units for $110 each from March 1 through December 31. If the company uses the last−​in, first−out inventory costing​ method, calculate the cost of ending inventory on December 31.​ (Assume that the company uses a perpetual inventory​ system.)

Please Provide calculations with answer

A. $ 7000

B. $31,500

C. $14,000

D. $350

Solutions

Expert Solution

Answer:

Option A : $7,000

Explanation:

LIFO method or Last-In First-Out is a method of valuation of inventory which considers that the last goods to come in to the warehouse goes out first i.e., sold first.

Here, the purchases are as follows:

January 31 : 400 units for $20 each

February 28 : 400 units for $40 each

Total units purchased = 800 units

The details of sales are as follows:

March 1 to December 31: 450 units for $110 each

:. Total units sold = 450 units

Number of units in the ending inventory =

Total units purchased - Total units sold

= 800 - 450

= 300 units

As LIFO method is used , the purchases on January 31 is only what remains .

:. Value of ending inventory as per LIFO method =

$20 * 350 units = $7,000

ekkarill92 answered 2 years ago
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