Question

The inventory data for an item for November are: Nov. 1 Inventory 20 units at $25 each 10 Purchase 25 units at $20 each 30 Purchase 20 units at $22 each Sale 35 units Using the last-in, first-out method, what is the cost of the merchandise inventory of 30 units on November 30

Answer 1

The cost of merchandise inventory at 30 November is $700

Step-by-step explanation:

By using last in first out, the last receipt of inventory is sold first,hence the 35 units sold would be taken from the last 20 units purchased at $22 each as well as the 25 units purchased at $20.

Invariably,the closing inventory would comprise of 10 units at $20 each and closing inventory of 20 units at $25 each

10 units at $20=$200

20 units at $25=$500

Total $700

The cost of merchandise inventory at 30 November is $700

Answer 2

Value closing inventory = $700

Step-by-step explanation:

Under the last -in-first-out (LIFO) method, inventory are priced using the price of the newest/latest batch in stock until a new batch is received after which the price of the new batch is used and this is continued.

So we adopt this principle as follows:

The value of the remaining units(closing inventory) will be determined as follows:

November 10 10× $20 = $200

November 1 20× $25 = $500

Total $700

Kindly note that the 35 units of inventory sold during the period are assumed to be taken from the last two bathes of November 30 and November 10 in that order.

While the closing inventory of 30 units consist of units in the batch of November 10 and the opening inventory of November 1.