CFAI curriculum Vol 3, P.380~381, Example 3.
Can we conclude that Periodic Inventory System is a real LIFO and Pepetual Inventory System is a distorted LIFO ?
Yes.
In fact, if you replenish inventory only when it reaches zero, perpetual LIFO and FIFO are identical.
Shall it be that periodic LIFO and perpetual LIFO will be identical if inventory is replenished only when it reaches zero (not LIFO vs, FIFO) ?
No.
Start with 0 units in inventory. Buy 100 units at $20/unit.
Sell all 100 units.
Buy 100 units at $30/unit.
Sell 40 units.
Ending inventory under FIFO: 60 units at $30/unit: $1,800.
Ending inventory under perpetual LIFO: 60 units at $30/unit: $1,800.
Ending inventory under periodic LIFO: 60 units at $20/unit: $1,200.
FIFO inventory = perpetual LIFO inventory ≠ periodic LIFO inventory.
Now, I realize what you meant.
On the other hand, periodic LIFO and perpetual LIFO will be identical too if inventory is replenished only when it reaches zero, since the ending inventory is those bought most recently for both periodic LIFO and perpetual LIFO , am I right ? Thanks !
No.
I just showed you that when you replenish inventory when it reaches zero, periodic LIFO inventory ($1,200) is not equal to perpetual LIFO ($1,800). Please read through the example again.
My pleasure.
s2000magician,
I got it ! Thank you very much for your enthusiam and patience !
Spectacular!
Happy to help.