In: Accounting
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!
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.