Question

On May 1, beginning inventory consists of 10 items at a cost of $10 each. On may 3, 10 items are purchased at $14 each. Using perpetual LIFO, ending inventory at may 31 equals ____________.

1) $196
2) $140
3) $236
4) $220

Answer 1

The ending inventory under perpetual LIFO, assuming that items have been sold, would leave the last purchased items in stock, which would be 10 items at $14 each, totaling $140 for the ending inventory.

Step-by-step explanation:

Using the perpetual LIFO (Last-In, First-Out) method, the ending inventory cost calculation at May 31 would require counting the remaining inventory starting with the most recently purchased items first. Since there were 10 items purchased at $14 each on May 3, if any items were sold during May, these would be the first ones to go. Assuming that by the end of May all items are still in inventory and none were sold, the ending inventory would be a combination of those purchased on May 3 and the beginning inventory on May 1.

The calculation would therefore be:

10 items at $14 each = $140 (most recent purchase on May 3)

• 10 items at $10 each = $100 (beginning inventory on May 1)

The total cost of ending inventory would then be $140 (recent purchase) + $100 (beginning inventory) for a total of $240. However, since $240 is not one of the provided options, we must infer that some items were sold during the month. Assuming that only the items purchased last (at $14 each) remain in the ending inventory, the total cost would then equate to the cost of these 10 items alone, which is $140.