Question

H UDUMA 20 URL X 2 Cell X Cenx tto X east.cengagenow.com/ilm/takeAssignment/takeAssignment Main.do?invoker assignments&takeAssignmentSession Locator assignment take Check My Work (3 remaining) eBook Exercise 2-8 LIFO Costing Using last-in, first-out perpetual inventory costing and the following information: July 1 3 5 6 10 11 Balance on hand, 1,000 yd of linen $4.00 each Issued 250 yd. Received 500 yd $4.50 each. Issued 150 yd. Issued 110 yd. Factory returned 10 yd, which were issued on the 10th, to the storeroom. Received 500 yd $5.00 each. Returned 300 yd to the vendor from the July 15 purchase. Issued 600 yd. 15 20 26 Compute the cost of materials used and the cost of the July 31 Inventory. Cost of materials used $ 3000 3 Cost of the July 31 Inventory s 2800 3 Hide Feedback Incorrect Check My Work Feedback Recall that the LIFO method assumes that materials issued are taken from the most recently purchased materials in stock

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Answer 1

First we compute Inventory Record as per FIFO Perpetual System. ie.,

	Receipts			Issues			Balance
	Qty	Per unit	Total	Qty	Per unit	Total	Qty	Per unit	Total
1-Jul							1000	4	4000
3-Jul				250	4	1000	750	4	3000
5-Jul	500	4.5	2250				750	4	3000
							500	4.5	2250
6-Jul				150	4	600	600	4	2400
							500	4.5	2250
10-Jul				110	4	440	490	4	1960
							500	4.5	2250
11-Jul	10	4	40 (Returns)				490	4	1960
							500	4.5	2250
							10	4	40
15-Jul	500	5	2500				490	4	1960
							500	4.5	2250
							10	4	40
							500	5	2500
20-Jul				300	5	1500 (Returns)	490	4	1960
							500	4.5	2250
							10	4	40
							200	5	1000
26-Jul				490	4	1960	390	4.5	1755
				110	4.5	495	10	4	40
							200	5	1000
	1010		4790	1410		5995	600		2795

Now we can note that there is returns to supplier (on 20th July) and Return to stores (on 11th July). Hence, the Issues total includes these elements. Now in order to get the correct Cost of Materials issued we compute as follows:

Cost of Materials issued as per the Inventory record above	5995
Less: Adjustment for Goods Returned to Suppliers (20th July)	1500
Less: Adjustment for Goods returned to stores (11th july)	40
Net Cost of Materials issued	4455

So,

• Cost of Materials issued = $ 4455.
• Cost of July 31 inventory = $ 2795.