TB MC Qu. 05-100 A company had the following... A company had the following purchases and sales during its first year of operations: Purchases Sales January: 10 units at $120 6 units February: 20 units at $125 5 units May: 15 units at $130 9 units September: 12 units at $135 8 units November: 10 units at $140 13 units On December 31, there were 26 units remaining in ending inventory. Using the perpetual LIFO inventory costing method, what is the cost of the ending inventory

$3,270

Explanation:

The perpetual LIFO inventory costing method is one in which adjustments are made to the balance of inventory for every item issued or received in a sequence of last in first out.

Given that 10 units at $120 6 units February: 20 units at $125 5 units May: 15 units at $130 9 units September: 12 units at $135 8 units November: 10 units at $140 13 units On December 31, there were 26 units remaining in ending inventory.

The net inventory units  = 10 - 6 + 20 - 5 + 15 - 9 + 12 - 8 + 10 - 13

= 26 units

Since

January reminder (in value) = 10 - 6 ) $120 = $480

February remainder (in value) = (20 - 5) $125 = $1,875

May remainder =  (15 - 9) $130 = $780

September = 12 - 8) $135 = $540

In November 10 items were purchased but 13 were sold.The makeup of the items sold are the 10 purchased in the month and 3 out of the remaining 4 items left off from September. Hence the balance for  September will be

=$135

Cost of ending inventory

= $480 + $1,875 + $780 + $135

= $3,270

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