Question

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FIFO and LIFO Costs Under Perpetual Inventory System The following units of a particular item were...

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?
$

Solutions

Expert Solution

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


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