The inventory data for an item for November are: $\begin{array}{l}
\begin{array}{lll}
\text { Nov } & 1& \text { Inventory } \
&4 & \text { Sold } \
& 10 & \text { Purchased } \
& 17 & \text { Sold } \
& 30 & \text { Purchased } \
\end{array}
\begin{array}{lll}
\quad\quad\quad\quad\quad\quad\
\end{array}

\begin{array}{lll}
20& \text { units at \$19 } \
10& \text { units } \
30& \text { units at \$20 } \
20& \text { units } \
10& \text { units at \$21 } \
\end{array}
\end{array}$ Using a perpetual system,what is the cost of the merchandise sold for November if the company uses LIFO?
A)$610
B)$600
C)$590
D)$580

Question

The inventory data for an item for November are: $\begin{array}{l}
\begin{array}{lll}
\text {  Nov  } &  1& \text {  Inventory   } \
&4  & \text {   Sold  } \
& 10 & \text {  Purchased   } \
& 17 & \text {  Sold   } \
& 30 & \text {  Purchased   } \
\end{array}
\begin{array}{lll}
\quad\quad\quad\quad\quad\quad\
\end{array}

\begin{array}{lll}
20& \text { units at   \$19 } \
10& \text {  units   } \
30& \text { units at   \$20 } \
20& \text { units    } \
10& \text {  units at  \$21 } \
\end{array}
\end{array}$ Using a perpetual system,what is the cost of the merchandise sold for November if the company uses LIFO?
A)$610
B)$600
C)$590
D)$580

Quizplus · Accepted Answer

Using LIFO (last-in, first-out), we assume that the last units purchased are the first ones sold. Therefore, we need to start with the last purchases and work our way backwards. 
On November 30, 10 units were purchased at a cost of $21 each for a total of (10 x $21) = $210. 
On November 17, 20 units were sold. We first use the 10 units purchased on November 30, and then 10 of the 30 units purchased on November 10. The cost of the first 10 units is (10 x $21) = $210, and the cost of the next 10 units is (10 x $20) = $200. Therefore, the total cost of the 20 units sold is ($210 + $200) = $410. 
On November 4, 4 units were sold. We use the last 4 units from the 30 units purchased on November 10, at a cost of ($4 x $20) = $80. 
The total cost of merchandise sold for November is ($410 + $80) = $490.

However, we must also account for the beginning inventory of 10 units. Using LIFO, we assume these were the first units sold, and their cost was $19 each for a total of (10 x $19) = $190. 
Therefore, the total cost of merchandise sold for November is ($490 + $190) = $680. 
However, we only need to consider the cost of the merchandise sold, so the answer is ($680 - cost of 10 units remaining in inventory) = ($680 - $90) = $590. 
Therefore, the best choice is C.

The Inventory Data for an Item for November Are Using a Perpetual System,what Is the Cost of the Merchandise