Question

In its first month of operations, Tamarisk, Inc. made three purchases of merchandise in the following sequence: (1) 260 units at $7, (2) 360 units at $9, and (3) 460 units at $10. Assuming there are 160 units on hand at the end of the period, compute the cost of the ending inventory under (a) the FIFO method and (b) the LIFO method. Tamarisk, Inc. uses a periodic inventory system.

Answer 1

a) $1,600

b) $1,120

Step-by-step explanation:

Data provided in the question:

Inc. made three purchases of merchandise in the following sequence:

1) 260 units at $7

2) 360 units at $9

3) 460 units at $10

Units in hand = 160 units

Now,

a) Under FIFO the goods purchased first will be sold at first

Thus,

ending inventory will include goods which were purchased at last.

Therefore,

Ending Inventory = 160 units × $10 = $1,600

b) Under LIFO the goods which are purchased last will be sold first

Thus,

ending inventory will include goods which were purchased first.

Therefore,

Ending Inventory = 160 units × $7 = $1,120