Use the following information for the month of May: May 1 Beginning inventory 40

Question

Use the following information for the month of May:

                                                    May      1      Beginning inventory     40 units @ $16

                                                                7      Purchases                  70 units @ $20

                                                                18    Sales                         25 units

                                                                22    Purchases                  40 units @ $22

                                                                29    Sales                         20 units

Assuming that a LIFO perpetual inventory system is used, what is ending inventory?

$1,880

$1,980

$2,080

$2,030

$1,830

Explanation / Answer

Perpetual Inventory Valuation - LIFO Units Price/Unit Total Cost Sales closing inventory opening inventory 40 16 640 40 units @ 16 = 640 Purchased on May 7 70 20 1400 40 units @ 16 = 640 70 units @ 20 = 1400 Sold on May 18 25 units 40 units @ 16 = 640 45 units @ 20 = 900 Purchased on May 22 40 22 880 40 units @ 16 = 640 45 units @ 20 = 900 40 units @ 22 = 880 Sold on May 29 20 units 40 units @ 16 = 640 45 units @ 20 = 900 20 units @ 22 = 440 Hence closing inventory on perpetual inventory - LIFO = 640 + 900 + 440 = 1980 Hence 2nd option $ 1980 is correct

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