Question

the company maintains a periodic inventory system. a physical inventory count shows 325 units in stock on january 31. what is (a) ending inventory on january 31, and (b) cost of goods sold for january, using the lifo inventory method?

Answer 1

The ending inventory on January 31 is the cost of the 325 units in stock as determined by a physical count using the LIFO method. The cost of goods sold for January is calculated by subtracting the ending inventory from the cost of goods available for sale, taking into account the most recent purchases as the ones sold first under LIFO.

Step-by-step explanation:

The question relates to the calculation of ending inventory and cost of goods sold (COGS) using the Last-In, First-Out (LIFO) inventory valuation method under a periodic inventory system. In the periodic inventory system, the ending inventory and COGS are determined at the end of the accounting period by a physical count.

(a) The ending inventory on January 31 is the cost associated with the 325 units in stock, valued based on the LIFO method. This means that the last costs of the products added to inventory (those most recently purchased or manufactured) are the first ones to be considered sold. The ending inventory would consist of the cost of the oldest items still in inventory.

(b) To calculate the cost of goods sold for January, we subtract the cost of ending inventory from the cost of goods available for sale. The COGS would reflect the costs of the most recent products acquired during the month that have been sold, following the LIFO principle.

As there are no specific cost figures provided in the question, calculations cannot be made and an example can't be given. However, this is the general approach that would be used when the actual cost data is available.

Answer 2

The ending inventory on January 31 is the physical inventory count of 325 units. To calculate the cost of goods sold for January using the LIFO method, additional information on inventory costs would be required. LIFO matches recent costs against revenues, affecting COGS and taxable income calculations.

Step-by-step explanation:

The question involves applying the Last-In, First-Out (LIFO) inventory valuation method under a periodic inventory system. To determine the (a) ending inventory on January 31, you would count the physical inventory, which the question states is 325 units. This physical count represents the ending inventory. For part (b), the Cost of Goods Sold (COGS) for January using the LIFO method involves knowing the cost of the inventory that was purchased or manufactured last, since LIFO assumes the items most recently acquired are sold first. Without additional information on the costs associated with the inventory units, we cannot calculate the COGS.

Under the LIFO method during inflation, the most recent costs, which are typically higher, are matched against revenue, often resulting in higher COGS and lower taxable income. The ending inventory, therefore, would tend to include the costs associated with the older inventory units, which might be lower if costs were rising.