Beginning inventory, purchases, and sales for Item Foxtrot are as follows: March 1 Inventory 270 units at $18 8 Sale 225 units 15 Purchase 375 units at $20 27 Sale 240 units Assuming a perpetual inventory system and using the last-in, first-out (LIFO) method, determine (a) the cost of merchandise sold on March 27 and (b) the inventory on March 31.
Beginning inventory, purchases, and sales for Item Foxtrot are as follows:
|
March |
1 |
Inventory |
270 units at $18 |
|
|
8 |
Sale |
225 units |
|
|
15 |
Purchase |
375 units at $20 |
|
|
27 |
Sale |
240 units |
Assuming a perpetual inventory system and using the last-in, first-out (LIFO) method, determine (a) the cost of merchandise sold on March 27 and (b) the inventory on March 31.
Inventory:
It is the goods and material a business hold to sell. There are two methods for recording inventory in the books of account, they are, periodic method and the perpetual method.
Perpetual Inventory System:
Perpetual Inventory is the system where the inventory is being changed perpetually. When there is a production, the inventory account is affected directly instead of the Purchase account. Here, there is no need to calculate the cost of goods sold account at the end of the accounting period, as with each sale, the Cost of Goods Sold Account is updated.
Inventory Valuation Method:
Inventory Valuation Methods are used to determine the cost of goods sold and the cost of ending inventory. The most common methods for inventory value are as under:
1. FIFO Method
2. LIFO Method
3. Weighted Average Method
4. Specific Identification Method
Here, we are required to calculate the value of ending inventory and the cost of goods sold using the LIFO Method. So, let us discuss this method and calculate them.
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