Question

FIFO and LIFO

Costs Under Perpetual Inventory System

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

Beginning inventory 47 units at $44

Sale 20 units at $68

First purchase 17 units at $47

Sale 33 units at $69

Second purchase 15 units at $48

Sale 7 units at $70

The firm uses the perpetual inventory system, and there are 19 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)

Inventory ledger (FIFO Method)

	Purchases			Cost of goods sold			Balance
	Units	Rate	Value	Units	Rate	Value	Units	Rate	Value
Beg. inventory							47	44	2,068
Sale				20	44	880	27	44	1,188
Purchase	17	47	799				27	44	1,188
							17	47	799
Sale				27	44	1,188
				6	47	282	11	47	517
Purchase	15	48	720				11	47	517
							15	48	720
Sale				7	47	329	4	47	188
							15	48	720

Ending inventory = 188 + 720

= $908

b)

Inventory ledger (LIFO Method)

	Purchases			Cost of goods sold			Balance
	Units	Rate	Value	Units	Rate	Value	Units	Rate	Value
Beg. inventory							47	44	2,068
Sale				20	44	880	27	44	1,188
Purchase	17	47	799				27	44	1,188
							17	47	799
Sale				17	47	799
				16	44	704	11	44	484
Purchase	15	48	720				11	44	484
							15	48	720
Sale				7	48	336	11	44	484
							8	48	384

Ending inventory = 484 + 384

= $868

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