Question

FIFO and LIFO costs under perpetual inventory system The following units of an item were available for sale during the year: Beginning inventory Sale First purchase Sale Second purchase Sale 8,400 units at $200 5,500 units at $300 14,500 units at $205 13,400 units at $300 15,500 units at $210 14,400 units at $300 The firm uses the perpetual inventory system, and there are 5,100 units of the item on hand at the end of the year. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Open spreadsheet

a. What is the total cost of the ending inventory according to FIFO? Round your answer to the nearest dollar. $ 3,255,000 X
b. What is the total cost of the ending inventory according to LIFO?

Answer 1

a. Ending inventory under FIFO = $1,071,000

b. Ending inventory value under LIFO = $1,036,500

Step-by-step explanation:

The data are merged together in the question and they are first separated before the questions are answered as follows:

Beginning inventory: 8,400 units at $200

Sale: 5,500 units at $300

First purchase: 14,500 units at $205

Sale: 13,400 units at $300

Second purchase: 15,500 units at $210

Sale: 14,400 units at $300

Number units available for sale = 8,400 + 14,500 + 15,500 = 38,400 units

Number of units sold = 5,500 + 13,400 + 14,400 = 33,300 units

a. What is the total cost of the ending inventory according to FIFO? Round your answer to the nearest dollar. $ 3,255,000 X

Since second purchase is 15,500 units and last sales is 14,400, the 5,100 closing stock must be from the last purchases. Therefore we have:

Ending inventory under FIFO = 5,100 * $210 = $1,071,000

b. What is the total cost of the ending inventory according to LIFO?

Beginning inventory balance after first sale = 8,400 - 5,500 = 2,900

Second sale distribution = 100% from first purchase = 13,400

First Purchase balance = 14,500 - 13,400 = 1,100

Third sale distribution = 100% from second purchase = 14,400

Second Purchase balance = 15,500 - 14,400 = 1,100

Ending inventory value under LIFO = (2,900 * $200) + (1,100 * $205) + (1,100 * $210) = $1,036,500