Question

During 2021, a company sells 400 units of inventory for $85 each. The company has the following inventory purchase transactions for 2021:

Date	Transaction	Numberof Units	UnitCost	TotalCost
Jan. 1	Beginning inventory	60	$70	$4,200
May 5	Purchase	180	72	12,960
Nov. 3	Purchase	190	75	14,250
		430		$31,410

Calculate ending inventory and cost of goods sold for 2021 assuming the company uses LIFO.

Answer 1

As per LIFO method, inventory which is purchased at the latest, is charged to cost of goods sold first. Hence, ending inventory consist of the units purchased at the earliest.

Number of units available for sale = 430

Number of units sold = 400

Ending inventory units = Number of units available for sale - Number of units sold

= 430 - 400

= 30

Date	Transaction	Number of Units	Unit Cost	Total Cost
Jan. 1	Beginning inventory	30	$70	$2,100

Cost of ending inventory = $2,100

Date	Transaction	Number of Units	Unit Cost	Total Cost
Jan. 1	Beginning inventory	60	$70	$4,200
May 5	Purchase	180	72	12,960
Nov. 3	Purchase	190	75	14,250
		430		$31,410

Cost of goods available for sale = $31,410

Cost of goods sold = Cost of goods available for sale - Cost of ending inventory

= 31,410 - 2,100

= $29,310

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