Question

Questions Key 1. The following lots of Commodity D were available for sale during the year. Use this information to answer the questions that follow. Beginning inventory 10 units at $60 First purchase 25 units at $65 Second purchase 30 units at $68 Third purchase 15 units at $75 The firm uses the periodic system, and there are 25 units of the commodity on hand at the end of the year. What is the amount of the inventory at the end of the year using the FIFO method AND LIFO,
solve the question with details.

Answer 1

Under FIFO ( First In First Out ) method of inventory valuation, Inventory purchased first will be issued first and the closing inventory consists of latest purchases

So, 25 units at year end will be valued as follows :

15 units from third purchase @ $75 + Balance ( 25 – 15 = 10 units) from second purchase @ $68

= 15 x $75 + 10 x $68

= $1,125 + $680

= $1,805

Under LIFO ( Last In First Out ) method of inventory valuation, Inventory purchased last will be issued first and the closing inventory consists of oldest purchases

So, 25 units at year end will be valued as follows :

10 units from beginning inventory @ $60 + Balance ( 25 – 10 = 15 units) from first purchase @ $65

= 10 x $60 + 15 x $65

= $600 + $975

= $1,575