In: Accounting
FIFO and LIFO Costs Under Perpetual Inventory System
The following units of a particular item were available for sale during the year:
Beginning inventory | 43 units @ $48 |
Sale | 37 units @ $70 |
First purchase | 31 units @ $50 |
Sale | 28 units @ $71 |
Second purchase | 20 units @ $51 |
Sale | 15 units @ $71 |
The firm uses the perpetual inventory system, and there are 14 units of the item on hand at the end of the year.
a. What is the total cost of the ending
inventory according to FIFO?
$
b. What is the total cost of the ending
inventory according to LIFO?
$
Solution a:
Computation of ending inventory under FIFO | ||||||||||||
Event | Beginning Inventory | Purchases | Cost of goods sold | Ending Inventory | ||||||||
Qty | Rate | Amount | Qty | Rate | Amount | Qty | Rate | Amount | Qty | Rate | Amount | |
Beginning | 43 | $48.00 | $2,064.00 | 0 | $0.00 | $0.00 | 0 | $0.00 | $0.00 | 43 | $48.00 | $2,064.00 |
Sale | 43 | $48.00 | $2,064.00 | 0 | $0.00 | $0.00 | 37 | $48.00 | $1,776.00 | 6 | $48.00 | $288.00 |
First Purchase | 6 | $48.00 | $288.00 | 31 | $50.00 | $1,550.00 | 0 | $0.00 | $0.00 | 6 | $48.00 | $288.00 |
31 | $50.00 | $1,550.00 | ||||||||||
sale | 6 | $48.00 | $288.00 | 0 | $0.00 | $0.00 | 6 | $48.00 | $288.00 | 9 | $50.00 | $450.00 |
31 | $50.00 | $1,550.00 | 22 | $50.00 | $1,100.00 | |||||||
second purchase | 9 | $50.00 | $450.00 | 20 | $51.00 | $1,020.00 | 0 | $0.00 | $0.00 | 9 | $50.00 | $450.00 |
20 | $51.00 | $1,020.00 | ||||||||||
Sale | 9 | $50.00 | $450.00 | 0 | $0.00 | $0.00 | 9 | $50.00 | $450.00 | 14 | $51.00 | $714.00 |
20 | $51.00 | $1,020.00 | 6 | $51.00 | $306.00 | |||||||
Ending Balance | 14 | $714.00 |
From above table, total cost of the ending inventory according to FIFO= $714
Solution b:
Computation of ending inventory under LIFO | ||||||||||||
Date | Beginning Inventory | Purchases | Cost of goods sold | Ending Inventory | ||||||||
Qty | Rate | Amount | Qty | Rate | Amount | Qty | Rate | Amount | Qty | Rate | Amount | |
Beginning | 43 | $48.00 | $2,064.00 | 0 | $0.00 | $0.00 | 0 | $0.00 | $0.00 | 43 | $48.00 | $2,064.00 |
Sale | 43 | $48.00 | $2,064.00 | 0 | $0.00 | $0.00 | 37 | $48.00 | $1,776.00 | 6 | $48.00 | $288.00 |
First Purchase | 6 | $48.00 | $288.00 | 31 | $50.00 | $1,550.00 | 0 | $0.00 | $0.00 | 6 | $48.00 | $288.00 |
31 | $50.00 | $1,550.00 | ||||||||||
sale | 6 | $48.00 | $288.00 | 0 | $0.00 | $0.00 | 28 | $50.00 | $1,400.00 | 6 | $48.00 | $288.00 |
31 | $50.00 | $1,550.00 | 3 | $50.00 | $150.00 | |||||||
second purchase | 6 | $48.00 | $288.00 | 20 | $51.00 | $1,020.00 | 0 | $0.00 | $0.00 | 6 | $48.00 | $288.00 |
3 | $50.00 | $150.00 | 3 | $50.00 | $150.00 | |||||||
20 | $51.00 | $1,020.00 | ||||||||||
Sale | 6 | $48.00 | $288.00 | 0 | $0.00 | $0.00 | 15 | $51.00 | $765.00 | 6 | $48.00 | $288.00 |
3 | $50.00 | $150.00 | 3 | $50.00 | $150.00 | |||||||
20 | $51.00 | $1,020.00 | 5 | $51.00 | $255.00 | |||||||
Ending Balance | 14 | $693.00 |
From above table, total cost of the ending inventory according to LIFO= $693