Question

The following lots of Commodity Z were available for sale during the year.

Beginning inventory 8 units at $49
First purchase 18 units at $54
Second purchase 50 units at $56
Third purchase 19 units at $65
The firm uses the periodic system, and there are 24 units of the commodity on hand at the end of the year.

What is the ending inventory balance at the end of the year according to the LIFO method?

Answer 1

The year end closing inventory is $1256

Step-by-step explanation:

The LIFO or Last In First Out method of inventory valuation follows that the latest or last purchased inventory will be the one that is sold first. Thus, under this method, the inventory that is purchased at start will be the one that will be left at the end and will form up the ending inventory.

The ending inventory of 24 units means that these units will comprise of inventory from the beginning of the period.

Thus, out of these 24 units, 8 units will be from the beginning inventory and the remaining from the first purchase (24 - 8 = 16).

The cost of ending inventory will be,

8 units at $49 per unit = $392

16 units at $54 per unit = $864

The total amount of closing inventory is = 392 + 864 = $1256