Question

The Lady in Red Corp. reported the following information for the month of September 2015:

Date
Units
Price
Amount
September 1, 2015 Inventory
100
$30
$3,000
September 9, 2015 purchase
50
$32
1,600
September 18, 2015 purchase
100
$33
3,300
September 27, 2015 purchase
50
$34
1,700
Total
300

$9,600

During September, Lady in Red Corp. sold 150 units. The company uses the periodic inventory system. Using the last-in, first-out (LIFO) method of inventory accounting, compute the cost of the ending inventory:

Answer 1

To calculate the cost of ending inventory using LIFO for Lady in Red Corp, we start by deducting the latest purchased units. The ending inventory consists of 100 units at $30 each and 50 units at $32 each, totaling to $4,600.

Step-by-step explanation:

The Lady in Red Corp uses the periodic inventory system and the LIFO accounting method to calculate the cost of ending inventory. To compute the cost of the ending inventory when 150 units are sold using LIFO, we assume the last units purchased (i.e., the latest inventory) are sold first. Since 150 units were sold, we would deduct these starting from the last purchase made on September 27, 2015.

1. Deduct the September 27 purchase of 50 units at $34 each.
2. Deduct the September 18 purchase of 100 units at $33 each.

After selling 150 units, the remaining inventory includes:

• 100 units from September 1 at $30 each = $3,000
• 50 units from September 9 at $32 each = $1,600

Thus, the cost of the ending inventory using LIFO is $3,000 + $1,600 = $4,600.