Question

Inventory information for Part 311 of Chi Corp. discloses the following information for the month of June (beginning balance of the month =0):

June   1. Purchased 600 units @ $16                                                            

June 11. Purchased 800 units @ $19            

June 15. Sold 300 units @ $40

June 20. Purchased 600 units @ $21            

June 27. Sold 200 units @ $43

Question 1) In cost flow assumptions for inventory such as LIFO and FIFO, we have to consider the order of purchase in order to compute COGS and ending inventory balance. Given the information of Chi Corp. above, answer the following questions:

a) If Chi Corp. uses LIFO and Perpetual system, then, what is the unit cost of the inventories sold on June 15? Why?

b) If Chi Corp. uses LIFO and Periodic system, then, what is the unit cost of the inventories sold on June 15? Why?

Answer 1

LIFO METHOD - PERPETUAL METHOD	PURHASES	COST OF GOODS SOLD	CLOSING BALANCE
Date	Particulars	Units (A)	Rate	Total Cost	Units (A)	Rate	Total Cost	Units (A)	Rate	Total Cost
June.01	Purchases	600	$                     16.00	$                   9,600				600	$         16.00	$         9,600
June.11	Purchases	800	$                     19.00	$                 15,200				600	$         16.00	$         9,600
								800	$         19.00	$      15,200
June.15	Sold				300	$             19.00	$           5,700	600	$         16.00	$         9,600
								500	$         19.00	$         9,500
June.20	Purchases	600	$                     21.00	$                 12,600				600	$         16.00	$         9,600
								500	$         19.00	$         9,500
								600	$         21.00	$      12,600
					200	$             21.00	$           4,200
June.27	Sold
								600	$         16.00	$         9,600
								500	$         19.00	$         9,500
								400	$         21.00	$         8,400
	Total	2000		$37,400	500		$9,900	1500		$      27,500
	Answer =
	Unit cost om sold on June 15 =	$                19.00
	This is because immediate before the sale of June 15 inventory is purchased at $ 19 Per unit
LIFO METHOD - PERIODICAL METHOD	PURHASES	COST OF GOODS SOLD	CLOSING BALANCE
Date	Particulars	Units (A)	Rate	Total Cost	Units (A)	Rate	Total Cost	Units (A)	Rate	Total Cost
June.01	Purchases	600	$                     16.00	$                   9,600				600	$         16.00	$         9,600
June.11	Purchases	800	$                     19.00	$                 15,200				800	$         19.00	$      15,200
June.20	Purchases	600	$                     21.00	$                 12,600	500	$             21.00	$         10,500	100	$         21.00	$         2,100
	Total Gods avilalbe for Sold	2000		$                 37,400
	Total	4000		$74,800	500		$10,500	1500		$      26,900
	Answer =
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