Question

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

Beginning inventory 21,600 units at $20.00

Sale 14,400 units at $40.00

First purchase 48,000 units at $25.20

Sale 36,000 units at $40.00

Second purchase 45,000 units at $26.40

Sale 33,000 units at $40.00

The firm uses the perpetual inventory system, and there are 31,200 units of the item on hand at the end of the year. What is the total cost of the ending inventory according to (a) FIFO, (b) LIFO?

Answer 1

(a)	FIFO
	Transactions	Amount	Ending Inventory
	Beginning Inventory	21,600 @20	21,600 @20
	Sales	14,400 @ 20	7,200 @ 20
	First Purchase	48,000 @25.20	7,200 @ 20
			48,000 @25.20
	Sales	7,200 @ 20	19,200 @ 25.20
		28,800 @ 25.20
	Second Purchase	45,000 @ 26.40	19,200 @ 25.20
			45,000 @ 26.40
	Sales	19,200 @25.20
		13,800 @ 26.40	31,200 @ 26.40
	Ending Inventory	$ 823,680	=31200*26.4
(b)	LIFO
	Transactions	Amount	Ending Inventory
	Beginning Inventory	21,600 @20	21,600 @20
	Sales	14,400 @ 20	7,200 @ 20
	First Purchase	48,000 @25.20	7,200 @ 20
			48,000 @25.20
	Sales	36,000 @ 25.20	7,200 @ 20
			12,000 @ 25.20
	Second Purchase	45,000 @ 26.40	7,200 @ 20
			12,000 @ 25.20
			45,000 @ 26.40
	Sales	33,000 @ 26.40	7,200 @ 20
			12,000 @ 25.20
			12,000 @ 26.40

Ending Inventory

$ 763,200

=7200*20+12000*25.2+12000*26.4