Final answer:
The ending balance in inventory on May 31 for item TCG46 using the LIFO method is $820. This balance represents 164 units remaining from the initial lot of inventory valued at $5 each. Last purchased items are sold first in LIFO, hence the ending inventory consists of the initially purchased items.
Step-by-step explanation:
To calculate the ending balance in inventory on May 31 using the Last-In, First-Out (LIFO) method for Teacups Galore, you must follow these steps:
- Determine the number of units sold.
- Identify the last batch of inventory purchased.
- Calculate the cost of goods sold (COGS) and ending inventory.
Starting with an inventory of 306 units at $5 each, 132 units are sold on May 5, followed by a purchase of 150 units at $6 each on May 10. Then, an additional 160 units are sold on May 27.
Using LIFO, the last units purchased are the first to be sold. Thus, for the 160 units sold on May 27, 150 units will be from the May 10 purchase and 10 units from the initial inventory. For the 132 units sold on May 5, all come from the initial inventory, as the May 10 purchase had not yet occurred.
Calculation of COGS and ending inventory:
- May 5 Sale: 132 units at $5 = $660
- May 27 Sale: 150 units at $6 (May 10 purchase) + 10 units at $5 (May 1 balance) = ($900 + $50) = $950
- Total COGS: $660 + $950 = $1610
Ending Inventory Calculation (all remaining units are from the initial balance since newer units were sold first under LIFO):
- 306 initial units - 132 units sold on May 5 - 10 units sold on May 27 = 164 units remaining
- 164 units at the initial price of $5 each = $820
The ending balance in inventory on May 31 for item TCG46, using the LIFO method, is thus $820.