Question

Beck Co.’s inventory is as follows: Beginning inventory 10 trees at $ 50 March 4 purchased 6 trees at 55 March 12 sold 8 trees at 100 March 20 purchased 9 trees at 60 March 27 sold 7 trees at 105 March 30 purchased 4 trees at 65 What was Beck’s cost of goods sold using the last-in, first-out (LIFO) perpetual method?

Answer 1

Cost of goods sold is $975

Step-by-step explanation:

What is LIFO? LIFO is an abbreviation which the characters there represents "Last In, First Out". It is a method of inventory valuation that assumes that the last material received in the store is the first to be issued out. This implies that materials issued for production are valued at the latest prices while closing inventory of materials are valued at the oldest prices.

In this question, Cost of goods sold is required to be calculated using the LIFO method of Inventory Valuation. Ordinarily, in calculating the cost of goods sold, only the opening inventory, total purchases and closing inventory are used but when calculating Cost of goods sold using LIFO, the items needed are the most recent inventory from purchases made and the total amount of inventory sold.

So, in order to calculate the given problem, we add the amount of trees sold during this period before we multiply the figure by the most recent inventory from purchases made during this period.

Amount of trees sold = 15 trees

Most recent inventory = $65

15 × $65 = $975

Therefore, $975 is the cost of goods sold

Answer 2

$860

Step-by-step explanation:

Under perpetual LIFO, the costs of the latest purchases as of the date of each sale are removed first. Details as follows:

On March 12, the latest cost at that time for the 8 trees sold was $55.

At the time of the sales on March 27, the latest costs of the 7 trees sold was $60 each.

Under perpetual LIFO its cost of goods sold will be $860 (8 at $55 and 7 at $60).