Question

Fulbright Corp. uses the periodic inventory system. During its first year of operations, Fulbright made the following purchases (listed in chronological order of acquisition):

• 50 units at $130 per unit
• 120 units at $127 per unit
• 180 units at $107 per unit

Sales for the year totaled 320 units, leaving 30 units on hand at the end of the year.

In comparing the ending inventory balances of FIFO and LIFO, the ending inventory value under FIFO less the ending inventory balance under LIFO results in a difference of:

Multiple Choice

• A $53.

• B $690.

• C $0.

• D $(690).

Answer 1

FIFO method: In this method those goods are sold first which are purchased first and the ending inventory is from recent purchases
Ending inventory = 30 units * $107	$        3,210
LIFO method : In this method those goods are sold first which are purchased last and the ending inventory is from beginning inventory and earlier purchases.
Enidng inventory = 30 units * $130	$        3,900

Ending inventory value under FIFO	$        3,210
Less : Ending inventory value under LIFO	$        3,900
Difference	$         (690)	Option D