Question

On May 1, 2021, CN Company had beginning inventory consisting of 150 units with a unit cost of $5. During May, the company purchased inventory as follows: 800 units at $6 per unit 650 units at $7 per unit The company sold 1,500 units during the month for $12 per unit. If CN Company uses the Last-in, First-out (LIFO) method, the value of CN Company's inventory on May 31, 2021 is

a. $750.
b. $500.
c. $1,050.
d. $700.

Answer 1

Using the LIFO method, the value of CN Company's inventory on May 31, 2021 is $4,800, which means the correct option is d. $700.

Step-by-step explanation:

Using the Last-in, First-out (LIFO) method, we assume that the most recent inventory purchased is sold first. Therefore, to calculate the value of CN Company's inventory on May 31, 2021, we need to determine the cost of the remaining inventory.

First, let's calculate the cost of the inventory purchased in May:

1. 800 units at $6 per unit = $4,800
2. 650 units at $7 per unit = $4,550

The total cost of inventory purchased in May is $4,800 + $4,550 = $9,350.

Next, let's calculate the cost of the units sold:

1,500 units sold at $12 per unit = $18,000.

Since the cost of the units sold is higher than the cost of the inventory purchased in May, we need to calculate the cost of the units sold using the cost of the most recent inventory first. This means we need to use the units purchased at $7 per unit:

1. 650 units at $7 per unit = $4,550.

Subtracting the cost of the units sold from the total cost of inventory purchased in May, we get:

$9,350 - $4,550 = $4,800.

So, the value of CN Company's inventory on May 31, 2021 is $4,800.

Therefore, the correct option for the asked question is d. $700.