Addison,Inc.uses a perpetual inventory system.The following is information about one inventory item for the month of September:

If Addison uses LIFO,the cost of the ending merchandise inventory on September 30 is
A)$800
B)$650
C)$750
D)$700

Question

Addison,Inc.uses a perpetual inventory system.The following is information about one inventory item for the month of September:

If Addison uses LIFO,the cost of the ending merchandise inventory on September 30 is
A)$800 
B)$650 
C)$750 
D)$700

Quizplus · Accepted Answer

According to LIFO (Last-In, First-Out) method, the latest inventory purchased will be assumed to be sold first. In this case, the inventory sold on September 30th will be assumed to be from the purchase made on September 20th at the cost of $100 per unit. So, the cost of the ending merchandise inventory on September 30th will be the cost of the remaining 5 units from the previous purchase made on September 10th, which is $750 (5 units x $150 per unit). Therefore, the correct answer is C.