Question

Arrow Street Market utilizes a periodic inventory system. A physical count on December 31 found 67 units of item CR113 in inventory. The following transactions were reported for the year:

January 1 Inventory 50 units at $820 each
May 15 Purchase 250 units at $805 each
November 1 Purchase 100 units at $815 each
Calculate the ending inventory balance of item CR113 using the last-in, first-out (LIFO) method.

Answer 1

Using the LIFO method for the periodic inventory system, the 67 units of item CR113 in inventory at the end of the year would be valued at the most recent purchase price of $815 each. Therefore, the ending inventory balance is 67 units x $815, totaling $54,605.

Step-by-step explanation:

The question at hand involves calculating the ending inventory balance for an item, CR113, using the LIFO method. To do this, we have to determine which items would be left in inventory at the end of the year after accounting for the sales during the year. Arrow Street Market found 67 units remaining in their inventory on December 31.

Using the Last-In, First-Out method, we start the inventory count with the most recently purchased items and work our way back to the oldest items. Starting with the November 1 purchase:

• 100 units at $815 each

Since we have 67 units in ending inventory, all of these would be from the November 1 purchase. We calculate the value of the ending inventory as follows:

• 67 units x $815 = $54,605

This means that, under the LIFO method, the ending inventory balance of item CR113 at Arrow Street Market is $54,605.