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Venus Wholesale Co.started carrying a new product in December.Purchases and sales of this product during the month were:

-Assuming the LIFO flow assumption is in use,the perpetual inventory records will indicate an ending inventory of this product of:
A)$9,800.
B)$10,600.
C)$10,800.
D)$8,000.

Question

[The following information applies to the questions displayed below.]
Venus Wholesale Co.started carrying a new product in December.Purchases and sales of this product during the month were:
 
-Assuming the LIFO flow assumption is in use,the perpetual inventory records will indicate an ending inventory of this product of:
A)$9,800. 
B)$10,600. 
C)$10,800. 
D)$8,000.

Quizplus · Accepted Answer

Under the LIFO (last in, first out) method, the cost of the most recent purchases are matched with revenue first. Therefore, the ending inventory is valued based on the oldest purchases.

Using the formula for LIFO perpetual inventory:

Ending inventory = (Units on hand × Cost of most recent purchase) + (Units purchased thereafter × Cost of oldest purchase)

Ending inventory = (400 × $22) + (200 × $50) = $8,800 + $10,000 = $18,800

However, we are told that the total cost of units available for sale during December was $28,400. Subtracting the ending inventory from the total cost gives us the cost of goods sold:

Cost of goods sold = $28,400 - $18,800 = $9,600

Therefore, the ending inventory is $10,600 ($18,800 - $9,600).

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