Question

The following units of an item were available for sale during the year:

Beginning inventory	23 units at $40
Sale	20 units at $60
First purchase	20 units at $41
Sale	5 units at $60
Second purchase	26 units at $43
Sale	18 units at $62

The firm uses the perpetual inventory system, and there are 26 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?
$

Answer 1

• [a] Total cost of ending inventory – FIFO = $ 182
• [b] Total cost of ending inventory – LIFO = $ 161
• Working

FIFO	Cost of Goods available for sale			Cost of Goods Sold			Ending Inventory
	Units	Cost/unit	COG for sale	Units sold	Cost/unit	COGS	Units	Cost/unit	Ending inventory
Beginning Inventory	23	$                   5.00	$                            115.00	23	$                 5.00	$                     115.00	0	$                   5.00	$                         -
Purchases:
#1	20	$                   6.00	$                            120.00	20	$                6.00	$                     120.00	0	$                   6.00	$                         -
#2	26	$                   7.00	$                            182.00	0	$                 7.00	$                              -	26	$                   7.00	$                182.00
TOTAL	69		$                            417.00	43		$                     235.00	26		$                182.00
LIFO	Cost of Goods available for sale			Cost of Goods Sold			Ending Inventory
	Units	Cost/unit	COG for sale	Units sold	Cost/unit	COGS	Units	Cost/unit	Ending inventory
Beginning Inventory	23	$                   5.00	$                            115.00	20	$                 5.00	$                     100.00	3	$                   5.00	$                  15.00
Purchases:
#1	20	$                   6.00	$                            120.00	5	$                 6.00	$                       30.00	15	$                   6.00	$                  90.00
#2	26	$                   7.00	$                            182.00	18	$                 7.00	$                     126.00	8	$                   7.00	$                  56.00
TOTAL	69		$                            417.00	43		$                     256.00	26		$                161.00