Question

Perpetual Inventory Using LIFO

Beginning inventory, purchases, and sales data for prepaid cell phones for May are as follows:

Inventory		Purchases		Sales
May 1	1,200 units at $33	May 10	600 units at $35	May 12	840 units
		May 20	540 units at $37	May 14	720 units
				May 31	360 units

a. Assuming that the perpetual inventory system is used, costing by the LIFO method, determine the cost of merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 4. Under LIFO, if units are in inventory at two different costs, enter the units with the HIGHER unit cost first in the Cost of Merchandise Sold Unit Cost column and LOWER unit cost first in the Inventory Unit Cost column.

Schedule of Cost of Merchandise Sold
LIFO Method
Prepaid Cell Phones
Date	Quantity Purchased	Purchases Unit Cost	Purchases Total Cost	Quantity Sold	Cost of Merchandise Sold Unit Cost	Cost of Merchandise Sold Total Cost	Inventory Quantity	Inventory Unit Cost	Inventory Total Cost
May 1								$	$
May 10		$	$
May 12					$	$
May 14
May 20
May 31
May 31	Balances					$			$

b. Based upon the preceding data, would you expect the inventory to be higher or lower using the first-in, first-out method?

Answer 1

a. Assuming that the perpetual inventory system is used, costing by the LIFO method, determine the cost of merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 4.

Date	Quantity Purchased	Unit cost	Purchase cost	Quantity sold	Cost of Merchandise Sold Unit Cost	Cost of Merchandise Sold Total Cost	Inventory quantity	Inventory unit cost	nventory Total Cost
May 1							1200	33	39600
May 10	600	35	21000				1200 600	33 35	39600 21000
May 12				600 240	35 33	21000 7920	960	33	31680
May 14				720	33	23760	240	33	7920
May 20	540	37	19980				240 540	33 37	7920 19980
May 31				360	37	13320	240 180	33 37	7920 6660
May 31	Balances					66000			14580

b. Based upon the preceding data, would you expect the inventory to be higher or lower using the first-in, first-out method

Inventory will be higher if using first in first out method