Question

Exercise 8-14

The following is a record of Pervis Ellison Company’s transactions for Boston Teapots for the month of May 2017.

May 1

Balance

400 units

@

$20

May 10

Sale

300 units

@

$38

12

Purchase

600 units

@

$25

20

Sale

540 units

@

$38

28

Purchase

400 units

@

$30

A)Assuming that perpetual inventories are not maintained and that a physical count at the end of the month shows 560 units on hand, what is the cost of the ending inventory using (1) FIFO and (2) LIFO?

B)Assuming that perpetual records are maintained and they tie into the general ledger, calculate the ending inventory using (1) FIFO and (2) LIFO.

Answer 1

A) Perpetual inventories are not maintained

(1) FIFO

Ending inventory:
May 28 purchases (400 units x $30)	12000
May 12 purchases (160 units x $25)	4000
Cost of ending inventory $	16000

(2) LIFO

Ending inventory:
Beginning balance (400 units x $20)	8000
May 12 purchases (160 units x $25)	4000
Cost of ending inventory $	12000

B) Perpetual records are maintained

(1) FIFO

	Purchased			Sold			Balance in Inventory
Date	Units	Unit cost	Total $	Units	Unit cost	Total $	Units	Unit cost	Total $
May-01							400	20	8000
May-10				300	20	6000	100	20	2000
May-12	600	25	15000				100	20	2000
							600	25	15000
May-20				100	20	2000
				440	25	11000	160	25	4000
May-28	400	30	12000				160	25	4000
							400	30	12000
Cost of ending inventory							560		16000

(2) LIFO

	Purchased			Sold			Balance in Inventory
Date	Units	Unit cost	Total $	Units	Unit cost	Total $	Units	Unit cost	Total $
May-01							400	20	8000
May-10				300	20	6000	100	20	2000
May-12	600	25	15000				100	20	2000
							600	25	15000
May-20				540	25	13500	100	20	2000
							60	25	1500
May-28	400	30	12000				100	20	2000
							60	25	1500
							400	30	12000
Cost of ending inventory							560		15500