Question

In its first month of operations, Larkspur, Inc. made three purchases of merchandise in the following sequence: (1) 135 units at $10, (2) 470 units at $11, and (3) 135 units at $12. Assuming there are 320 units on hand, compute the cost of the ending inventory under the (a) FIFO method and (b) LIFO method. Larkspur uses a periodic inventory system.

Answer 1

Ending inventory under:

FIFO = $3655

LIFO = $3385

Step-by-step explanation:

Ending Inventory under FIFO

These 320 units purchased at the end will make up the ending inventory,

135 units at $12 = $1620

(320-135 = 185) 185 units at $11 = $2035

Total cost of ending inventory = $3655

Ending Inventory under LIFO

The 320 units under LIFO will be the ones purchased at the start.

135 units at $10 = $1350

(320-135 = 185) 185 units at $11 = $2035

Total cost of ending inventory $3385