Question

venus wholesale company started carrying a new product in december. purchases and sales of this product during the month were: december 20 purchased 130 units at $83 per unit. december 26 sold 120 units. december 28 purchased 130 units at $90 per unit. assuming the last-in, first-out (lifo) flow assumption is in use, the perpetual inventory records will indicate an ending inventory of this product of:

Answer 1

With the LIFO inventory method, the ending inventory of Venus Wholesale Company would be derived only from the first purchase batch of products, as the latest items are sold first. Hence, the ending inventory is 10 units valued at $83 each, totaling $830.

Step-by-step explanation:

Using the Last-In, First-Out (LIFO) inventory costing method, the ending inventory calculation takes into account that the last items purchased are the first to be sold. Venus Wholesale Company made two purchases in December but sold only from the last batch, meaning that the remaining inventory would come from the first purchase.

The initial purchase was 130 units at $83 per unit. Since 120 units were sold, we're left with 10 units from the first batch. This gives us an ending inventory calculated as:

10 units x $83 = $830.

The second purchase of 130 units at $90 per unit is fully retained since the LIFO method assumes the last purchased goods are sold first. Therefore, the second purchase is not considered in calculating the ending inventory as those items have not yet been sold. The ending inventory value thus solely reflects the unsold portion of the initial purchase, resulting in an ending inventory of $830.