Question

In: Accounting

Addison Inc. uses a perpetual inventory system. The following information about one inventory item for the...

Addison Inc. uses a perpetual inventory system. The following information about one inventory item for the month of september:

Sep. 1 Inventory 24 units at $15
         5 sold 17 units
        17 Purchased 10 units at $20
         30 sold 8 units

If Addison uses LIFO, the cost of the ending inventory on September 30 is

a. $160
b.$125
c. $180
d. $145

Please help! I don't understand. Due at 11:59 p.m. Thanks!

Solutions

Expert Solution

Answer:

d. $ 145

Explanation:

Last-in, First-out Method
Purchases Sold Balance
Date Units Rate Amount Units Rate Amount Units Rate Amount
Opening             24 $         15 $       360
Sold                17 $     15.00 $       255               7 $         15 $       105
Purchased            10 $    20.00 $    200               7 $         15 $       105
            10 $         20 $       200
Sold                  8 $     20.00 $       160               7 $         15 $       105
              2 $         20 $         40
TOTAL            10                25 $       415               9 $       145

Clearly, option 'd' is correct and other options are incorrect.

In case of any doubt or clarification, you're welcome to come back via comments.


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