Question

Beginning inventory, purchases, and sales for an inventory item are as follows: Sep. 1 Beginning Inventory 25 units @ $11 5 Sale 13 units 17 Purchase $13 25 units 15 units 30 Sale Assuming a perpetual inventory system and the last-in, first-out method: a. Determine the cost of the goods sold for the September 30 sale. b. Determine the inventory on September 30.

Answer 1

Answer)

Last-in, First-out Method: Under this method, cost of inventory sold and value of ending inventory is calculated on the assumption that the inventory which is latest bought will be first sold and moving backwards.

Calculation of Cost of Goods Sold and Value of Ending Inventory under Last-in, First-out method

Date	Purchases			Cost of Goods Sold			Inventory Balance
	Units	Cost per unit	Amount	Units	Cost per unit	Amount	Units	Cost per unit	Amount
Sep'1							25	$ 11	$ 275
Sep'5				13	$ 11	$ 143	12	$ 11	$ 132
Sep'17	25	$ 13	$ 325				12	$ 11	$ 132
							25	$ 13	$ 325
Sep'30				15	$ 13	$ 195	12	$ 11	$ 132
							10	$ 13	$ 130
Total	25		$ 325	28		$ 338	22		$ 262

1. Cost of Goods Sold: The cost of goods sold for the month of September is $ 338.
2. Value of Inventory: The value of inventory on September 30 is $ 262.