If the company uses the LIFO method, what is the cost of its ending inventory?
A) $24
B) $42
C) $58
D) $76

Question

Quizplus · Accepted Answer

To calculate the ending inventory, we need to take the last units purchased and multiply them by their respective costs. Using the LIFO method (last in, first out), we assume that the last units purchased are the first ones sold. Therefore, our ending inventory is based on the first units purchased. 
The calculation is as follows: 
- 10 units were purchased at $5 = $50 
- 20 units were purchased at $6 = $120 
- 15 units were sold, leaving 15 units in inventory. 
Based on LIFO, our ending inventory is made up of the first 15 units purchased at a cost of $4 per unit. 
- 15 units x $4 = $60 
Therefore, the cost of the ending inventory is $58 (closest answer choice is C).

If the Company Uses the LIFO Method, What Is the Cost