Question

McGuire Metals Ltd uses the periodic inventory method and had the following inventory information available:

		Units	Unit Cost	Unit Price
1st January	Beginning inventory	38	$3
20th February	Sale	15		$5
25th July	Purchase	20	$4
20th October	Purchase	10	$5.5
20th December	Sale	30		$8

Required

What would the Inventory amount be as reported on the balance sheet at 31 December 2019 if the perpetual LIFO method is used?

Use the following template in your Word document file.

Metro Computer Company Ltd.
FIFO
	Purchases			Cost of sales			Inventory on hand
Date	Quantity	Unit cost	Total cost	Quantity	Unit cost	Total cost	Quantity	Unit cost	Total cost

Answer 1

The question mention LIFO method and the table mentions FIFO. I have calculated for both the methods. Detailed Tables below the explanation :

The inventory amount as on reported balance sheet at 31st December 2019 if LIFO is used will be $69.

The inventory amount as on reported balance sheet at 31st December 2019 if FIFO is used will be $107.

FIFO stands for “First-In, First-Out”. It is a method used for cost flow assumption purposes in the cost of goods sold calculation. The FIFO method assumes that the oldest products in a company’s inventory have been sold first. The costs paid for those oldest products are the ones used in the calculation.

The last in, first out (LIFO) method is used to place an accounting value on inventory. The LIFO method operates under the assumption that the last item of inventory purchased is the first one sold

FIFO	Purchases	Cost of Goods Sold	Inventory on Hand
Date	Quantity	Unit Cost	Total cost	Quantity	Unit Cost	Total cost	Quantity	Unit Cost	Total cost
1-Jan							38	$           3	$       114
20-Feb				15	$           3	$         45	23	$           3	$         69
25-Jul	20	$           4	$         80				23	$           3	$         69
							20	$           4	$         80
20-Oct	10	$        5.5	$         55				23	$           3	$         69
							20	$           4	$         80
							10	$        5.5	$         55
20-Dec				23	$           3	$         69	13	$           4	$         52
				7	$           4	$         28	10	$        5.5	$         55
31-Dec							13	$           4	$         52
							10	$        5.5	$         55
Inventory as on 31st Dec using FIFO						$       107
LIFO	Purchases	Cost of Goods Sold	Inventory on Hand
Date	Quantity	Unit Cost	Total cost	Quantity	Unit Cost	Total cost	Quantity	Unit Cost	Total cost
1-Jan							38	$           3	$       114
20-Feb				15	$           3	$         45	23	$           3	$         69
25-Jul	20	$           4	$         80				23	$           3	$         69
							20	$           4	$         80
20-Oct	10	5.50	$         55				23	$           3	$         69
							20	$           4	$         80
							10	5.50	$         55
20-Dec				10	5.50	$         55	23	$           3	$         69
				20	$           4	$         80
31-Dec							23	$           3	$         69
Inventory as on 31st Dec using LIFO						$         69