Question

Lisa Company uses the periodic inventory system to account for inventories. Information related to Lisa Company's inventory at January 31 is given below: January 1 Beginning inventory 400 units x $10.40 - 8 Purchase 780 units x $12.70 16 Purchase 605 units x $13.00 - 24 Purchase 205 units x $13.40 - Total units and cost 1,990 units $4,160 9.906 7.865 2.747 $24,678 (a) Value the ending inventory using the FIFO cost assumption if 600 units remain on hand at January 31. Ending Inventory $ Save for Later Attempts: 0 of 1 used Submit Answer Question Part Score --/13.33

Answer 1

Solution:

Ending Inventory Value $ 7,882

Explanation:

As per the FIFO method ending inventory of 600 units at the end of 31st Jan is calculated as under

Date	Particular	Amount in $
24 Jan	Purchase	2,747 (205 units @ 13.40)
16 Jan	Purchase (Refer to Note 2)	5,135 ( 395 units @ 13)
Total		7,882

Note:

1. FIFO method stand for First in First out under this oldest purchased units are sold first.  

2. This question can be solved with a reverse calculation for the number of units in hand. This reverse calculation help to identify units in hands belong to which purchase date. Total units 600 out of which 205 units are from 24 Jan last purchase as per FIFO method and remaining units out of 600 units that is 395 units (600-205 units) must belong from 2nd last purchase dated 16 Jan @ $ 13 per units.