Question

Priscilla has the following inventory information.

July 1 Beginning Inventory 20 units at $19 $380
7 Purchases 70 units at $20 1,400
22 Purchases 10 units at $23 230
$2,010

A physical count of merchandise inventory on July 31 reveals that there are 35 units on hand. Using LIFO inventory method, the amount allocated to cost of goods sold for July is:______

a. 1,430.
b. $1,380.
c .$1,390.
d. $1,407.

Answer 1

$1,330

Step-by-step explanation:

July operation units unit price total

1 Beginning Inventory 20 $19 $380

7 Purchases 70 $20 $1,400

22 Purchases 10 $23 $230

Total 100 $2,010

31 Ending balance 35

20 $19 $380

15 $20 $300

Total 35 $680

Cost of goods sold = total inventory purchases - ending balance (using LIFO) = $2,010 - $680 = $1,330

when you use last in, first out (LIFO) the last units purchased are the first units to be sold.

Cost of goods sold

10 units x $23 = $230

55 units x $20 = $1,100

total $1,330

Answer 2

$1,330

Step-by-step explanation:

According to the LIFO method, the last inventory in should be the first out. That is, the units purchased at the 22nd should be the first sold, followed by the ones purchased at the 7th and then by the beginning inventory on July 1st.

The number of units sold during July is:

`n=20+70+10-35\\n=65\ units\\`

Using LIFO, the amount allocated to those goods should come from 10 units at $23 and 55 units at $20:

`COGS = 10*\$23+55*\$20\\COGS = \$1,330`

Therefore, the amount allocated to cost of goods sold for July is $1,330.

None of the alternatives provided are correct.