Question

The following information was drawn from the inventory records of Preston Company. Beginning inventory (purchased in Year 1) 100 Units @ $10 each 1st Purchase made in Year 2 400 Units @ $12 each 2nd Purchase made in Year 2 500 Units @ $14 eachUnits Sold 950 Units @ $15 each Based on this information, which of the following represents the amount of ending inventory appearing on the balance sheet assuming a LIFO cost flow

Answer 1

As per LIFO closing inventory = $500

Step-by-step explanation:

Under LIFO method the transaction of sales is made with the latest inventory, that is at the last closing inventory consists the goods which are oldest.

In the year sale is of 950 units that means,

Purchase in year 2 of 500 units @ $14 is consumed

Purchase made in year 2 of 400 units @ $12 is also consumed

And 50 units from purchase in year 1 of 100 units @ $10

Therefore, closing inventory

50 units @ $10 = $500

This is because recent purchases are sold first.