Question

A firm has beginning inventory of 400 units at a cost of $12 each. Production during the period was 700 units at $13 each. If sales were 800 units, what is the value of the ending inventory using LIFO?

A. $2,750

B. $3,600

C. $3,300

D. $3,850

Answer 1

The value of the ending inventory using LIFO is $3,900.

Using the LIFO method, the value of the ending inventory for the firm, which had a beginning inventory of 400 units at $12 each and sold 800 units after producing 700 additional units at $13 each, would be $3,600.

Step-by-step explanation:

In LIFO (last in, first out) accounting, the assumption is that the last units purchased are the first ones sold. To calculate the value of the ending inventory, we need to determine how many units are remaining at the end of the period and multiply that by their cost.

In this case, the firm started with 400 units at a cost of $12 each, producing an inventory value of 400 * 12 = $4800. During the period, 700 units were produced at a cost of $13 each, bringing the total inventory to 400 + 700 = 1100 units.

Since sales were 800 units, we subtract that from the total inventory: 1100 - 800 = 300 units remaining. The value of the ending inventory using LIFO is then 300 * $13 = $3900.

Using the LIFO method, the value of the ending inventory for the firm, which had a beginning inventory of 400 units at $12 each and sold 800 units after producing 700 additional units at $13 each, would be $3,600.

When a firm uses the Last-In, First-Out (LIFO) method to calculate the value of ending inventory, it assumes that the last goods purchased or produced are the first ones to be sold. To calculate the value of the ending inventory for the firm in question, we need to consider the costs of the oldest inventory since the firm sold 800 units.

Here's how you would calculate it:

The firm had a beginning inventory of 400 units at $12 each, totaling $4,800.

Production added 700 units at $13 each, totaling $9,100.

Since 800 units were sold, and using LIFO, we assume that all the 700 newly produced units were sold, along with 100 of the beginning inventory.

This leaves us with 300 units from the beginning inventory, at the original cost of $12 each.

Thus, the value of the ending inventory using LIFO would be 300 units x $12/unit, which equals $3,600.

The correct answer to the student's question is B. $3,600.

Answer 2

Using LIFO, the value of the ending inventory for the firm, which had a beginning inventory of 400 units at $12 each and produced an additional 700 units at $13 each with 800 units sold, is $3,600.

Step-by-step explanation:

The question involves calculating the value of ending inventory using the Last-In, First-Out (LIFO) method. We know that the firm began with 400 units at $12 each and produced 700 units at $13 each.

Using LIFO accounting, the most recent costs are assigned to the sold goods first. Since there were 800 units sold, the remaining inventory will consist of the earliest costs. Here's a step-by-step calculation:

1. Determine total units at end: (400 + 700) - 800 = 300 units remaining.
2. Calculate cost of ending inventory: 300 units at the oldest cost ($12 each) = $3,600.

Therefore, the value of the ending inventory using LIFO is $3,600, which corresponds to option B.