Question

Sassy Saxophones has the following inventory data: Beginning Inventory 30 units at $120 Purchases 180 units at $112 Sale 120 units Purchases 90 units at $115 Sale 84 units Assuming that a periodic system is used, what is the amount allocated to ending inventory on a LIFO basis?

Answer 1

To calculate ending inventory on a LIFO basis, total the available units, subtract the units sold, and then apply the LIFO assumption to the remaining units. The calculated amount for the ending inventory using LIFO, combining the oldest costs for the remaining units, equals $10,320.

Step-by-step explanation:

The student is asking about the calculation of ending inventory using the Last-In, First-Out (LIFO) method within a periodic inventory system. To solve the problem, we must proceed by using the LIFO assumption, which requires that the last units purchased are the first ones to be sold.

Calculation:

1. The total number of units available for sale is 30 (beginning inventory) + 180 (first purchase) + 90 (second purchase) = 300 units.
2. Total units sold are 120 + 84 = 204 units.
3. Thus, ending inventory units are 300 - 204 = 96 units.
4. Under LIFO, we allocate the ending inventory based on the oldest costs. Since the last units purchased (at $115) would have been sold first, we start the inventory count from the first purchase (at $112) and then to the beginning inventory (at $120).
5. Ending inventory calculation:
   

Therefore, the amount allocated to ending inventory on a LIFO basis is $10,320.