TB MC Qu. 05-100 A company had the following... A company had the following purchases and sales during its first year of operations: Purchases Sales January: 10 units at $120 6 units February: 20 units at $125 5 units May: 15 units at $130 9 units September: 12 units at $135 8 units November: 10 units at $140 13 units On December 31, there were 26 units remaining in ending inventory. Using the perpetual LIFO inventory costing method, what is the cost of the ending inventory

The perpetual LIFO inventory costing method is one in which adjustments are made to the balance of inventory for every item issued or received in a sequence of last in first out.

Given that 10 units at $120 6 units February: 20 units at $125 5 units May: 15 units at $130 9 units September: 12 units at $135 8 units November: 10 units at $140 13 units On December 31, there were 26 units remaining in ending inventory.

The net inventory units = 10 - 6 + 20 - 5 + 15 - 9 + 12 - 8 + 10 - 13

= 26 units

Since

January reminder (in value) = 10 - 6 ) $120 = $480

February remainder (in value) = (20 - 5) $125 = $1,875

May remainder = (15 - 9) $130 = $780

September = 12 - 8) $135 = $540

In November 10 items were purchased but 13 were sold.The makeup of the items sold are the 10 purchased in the month and 3 out of the remaining 4 items left off from September. Hence the balance for September will be

=$135

Cost of ending inventory

= $480 + $1,875 + $780 + $135

= $3,270