J. Q. Adams Co. had beginning inventory of 50 units with a total cost of $1000. During the period, J. Q. Adams first purchased 20 units for $800 and then 30 units for $1800. The company uses the LIFO periodic method of costing inventory. If a physical count of ending inventory showed 45 units, at what amount would they be valued on the balance sheet?
A) $1620
B) $900
C) $2400
D) $3600

Question

Quizplus · Accepted Answer

According to LIFO periodic method, the last units purchased are assumed to be sold first. 
Therefore, the cost of goods sold (COGS) is calculated as:
30 units @ $60 = $1800
20 units @ $40 = $800
Total COGS = $2600
The ending inventory can be calculated as:
Beginning Inventory + Purchases - COGS = Ending Inventory
50 units @ $20 = $1000 (beginning inventory)
20 units @ $40 = $800 (first purchase)
30 units @ $60 = $1800 (second purchase)
$1000 + $800 + $1800 - $2600 = $1000
The ending inventory is 45 units and so the value of each unit in the inventory is $1000/45= $22.22(rounded to the nearest cent). 
Thus, the value of 45 units on the balance sheet would be:
45 units @ $22.22 = $999.90 (rounded to the nearest cent), which is closest to $900. Therefore, option B is the correct answer.

J Q Adams Co