To calculate the cost of goods sold (COGS) and the inventory on July 31 using the last-in, first-out (LIFO) method, we need to follow these steps:
1. Calculate the total cost of the remaining inventory on July 27 using the LIFO method.
2. Calculate the cost of goods sold using the LIFO method.
Given the data, let's perform the calculations step by step.
Step 1: Calculate the value of the remaining inventory on July 27 using the LIFO method:
1. The July 15 purchase of 120 units at $60 per unit is the last purchase.
2. The remaining inventory after the July 27 sale consists of 90 units from the July 15 purchase and 30 units from the July 1 inventory.
Total cost of 90 units (from July 15 purchase): 90 * $60 = $5400
Total cost of 30 units (from July 1 inventory): 30 * $56 = $1680
Total value of remaining inventory on July 27 using LIFO: $5400 + $1680 = $7080
Step 2: Calculate the cost of goods sold on July 27 using the LIFO method:
1. The first sale on July 8 of 60 units is from the July 1 inventory (LIFO).
2. The second sale on July 27 of 80 units is from the July 15 purchase and the remaining inventory (LIFO).
COGS for July 27 sale: 60 units * $56 (from July 1 inventory) + 20 units * $60 (from July 15 purchase) = $3360 + $1200 = $4560
Now, to find the inventory on July 31, we need to subtract the cost of goods sold from the value of the remaining inventory on July 27:
Inventory on July 31 = Value of remaining inventory on July 27 - Cost of goods sold on July 27
Inventory on July 31 = $7080 - $4560 = $2520
Therefore, according to the last-in, first-out (LIFO) method:
(a) The cost of goods sold on July 27 is $4560.
(b) The inventory on July 31 is $2520.