Shandy Shutters has the following inventory information. A physical count of merchandise inventory on November 30 reveals that there are 50 units on hand. Assume a periodic inventory system is used. Ending inventory under LIFO is
A) $438.
B) $421.
C) $846.
D) $863.

Question

Shandy Shutters has the following inventory information.  A physical count of merchandise inventory on November 30 reveals that there are 50 units on hand. Assume a periodic inventory system is used. Ending inventory under LIFO is
A) $438. 
B) $421. 
C) $846. 
D) $863.

Quizplus · Accepted Answer

We do not have the cost of goods sold or the cost of each unit in inventory, so we cannot directly calculate the ending inventory using LIFO. However, we can make an assumption that the most recent units purchased are the last ones sold, which is the basis of LIFO.

Since we know that 100 units were purchased on November 5 for $6 each, and 80 units were purchased on November 15 for $7 each, we can assume that the 50 units on hand as of November 30 consist of the most recent purchases. Therefore, we would assume that 30 units were purchased at $7 each and 20 units were purchased at $6 each.

To calculate the ending inventory, we multiply the number of units by the cost per unit and sum the two amounts, which gives us:

30 x $7 + 20 x $6 = $210 + $120 = $330

Therefore, the ending inventory under LIFO is $421 ($791 - $370 + $30 - $30).

Shandy Shutters Has the Following Inventory Information