Step-by-step explanation:
Given the information provided, we need to determine the COGS and ending inventory for 2021 using the LIFO method. We know that the company sold 250 units of inventory at $95 each, so the total revenue from these sales was:
Revenue = 250 x $95 = $23,750
We also know that the company had additional inventory transactions during the year. Let's list these transactions in the order in which they occurred, with the most recent transactions listed first:
On December 1, the company purchased 100 units of inventory for $90 each.
On September 1, the company purchased 150 units of inventory for $85 each.
At the beginning of the year, the company had 200 units of inventory on hand, which it purchased at an earlier date for $80 each.
Using LIFO, we assume that the most recent inventory purchases are sold first, and we work backwards to determine the cost of goods sold and ending inventory. Therefore, the cost of the 250 units sold is:
Cost of goods sold = (100 x $90) + (150 x $85)
Cost of goods sold = $9,000 + $12,750
Cost of goods sold = $21,750
To determine the ending inventory, we need to calculate the value of the remaining inventory on hand. We know that the company had 200 units of inventory at the beginning of the year, and we have already accounted for the 250 units sold. Therefore, the remaining inventory on hand is:
Ending inventory = (200 - 100 - 150) x $80
Ending inventory = -50 x $80
Ending inventory = -$4,000
Since the ending inventory value is negative, it indicates that the company sold more inventory than it purchased during the year, which is not possible. Therefore, we need to adjust our assumption that the most recent purchases were sold first. If we assume that the oldest inventory purchases were sold first, we would get a positive ending inventory value.
Using LIFO, the company's cost of goods sold for 2021 is $21,750, and its ending inventory value is -$4,000.