Given the following data what is the ending inventory value using the LIFO method? Purchases Sales 50 units at $50/unit 25 units at $55/unit 60 units at $45/unit 30 units at $50/unit 70 units at $40/unit 45 units at $45/unit A) $3,250. B) $3,850. C) $3,200. Please explain your answer. Thanks!
LIFO Method - Sales - First 25 units sold from last 70 units bought -> 25 x 40 =1000 Next 30 units sold from the same last 70 (70 - 25 = 45) -> 30 x 40 = 1200 Next 15 (since 15 are left from 70 units batch) sold from cost of 70 units -> 15 x 40 = 600 Last 30 from 60 units bought @ $45/unit -> 30 x 45 = 1350 Total cost of above sold items = 4150 Total Cost of purchases = 8000 Inventory remaining = 8000 - 4150 = 3850 …Ans is B
Total 100 units were sold, available units for sale (purchase plus beginning inventory) was 180. So there are 80 units in the ending inventory. Under FIFO, units from the last purchase are remained, (70x40)+(10x45)= 730. In LIFO, ending inventory is (50x50)+(30x45)=3850. Remember, LIFO usually results higher COGS and lower ending inventory than FIFO, but in this case the price is declining so the result is reversed.