Question

A company had the following purchases and sales during its first year of operations:

Purchases Sales
January: 10 units at $120 6 units
February: 20 units at $125 5 units
May: 15 units at $130 9 units
September: 12 units at $135 8 units
November: 10 units at $140 13 units
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On December 31, there were 26 units remaining in ending inventory. Using the Periodic LIFO in goods sold? (Assume all sales were made on the last day of the month.)

Multiple Choice

a. $8,670

b. $5,400

c. $5,470

Answer 1

Answer:

the Periodic LIFO in cost of  goods sold is $5,433 (none of suggested options)

Explanation:

Cost of Goods Sold Calculations

January: 6 units ×  $120      =   720

February: 5 units ×  $125    =   625

May: 9 units ×  $130            = 1,170

September: 8 units ×  $138 =1,104

November: 10 units × $140 =1,400

                   3 units × $138   =  414

Total                                      = 5,433

Answer 2

Answer:

C) $5,470

Explanation:

Purchases      Units         Unit price       Total            Sales (in units)        

January:           10                $120            $1,200               6 units

February:        20                $125            $2,500              5 units

May:                 15                 $130           $1,950                9 units

September:     12                 $135           $1,620                8 units

November:      10                 $140           $1,400               13 units

total                 67                                    $8,670               41 units

Ending            26              using LIFO     $3,200

inventory        

                       10                  $120            $1,200

                       16                  $125            $2,000

Cost of goods sold using LIFO = $8,670 - $3,200 = $5,470

Last in, first out (LIFO) method uses the cost of the last units purchased to determine the cost of goods sold.