Question

In its first month of operations, Literacy for the Illiterate opened a new bookstore and bought merchandise in the following order: (1) 240 units at $10 on January 1, (2) 480 units at $11 on January 8, and (3) 780 units at $12 on January 29.

assume 950 units are on hand at the end of the month, calculate the cost of goods available for sale, ending inventory, and cost of goods sold under LIFO. Assume a periodic inventory system is used.

Answer 1

Closing inventory = $10,440

Cost of goods sold = $6,600

Step-by-step explanation:

Under the LIFO inventory system units of inventory are priced using the price of the most recent batch purchased and this continues in turn.

Cost of goods sold:

Units sold = 240 +480 + 780 - 950 = 550

The units of 550 sold will be priced as follows:

550 × $12 = $6,600

Closing inventory

= 950 units

This will be valued as follows:

230 × $12 =2,760

480 × $11 =5,280

240 × $10 =2,400

2,760 + 5,280 + 2,400= $10,440

Closing inventory = $10,440

Note the 230 units is the balance of the batch of 780 units after issuing the units sold i.e (780 - 550)

Closing inventory = $10,440

Cost of goods sold: $6,600