Pappy's Staff Junkets has the following inventory information. Assuming that a perpetual inventory system is used, what is the ending inventory on a LIFO basis?
A)$5,848
B)$5,860
C)$6,068
D)$6,346

Question

Pappy's Staff Junkets has the following inventory information.  Assuming that a perpetual inventory system is used, what is the ending inventory on a LIFO basis?
A)$5,848 
B)$5,860 
C)$6,068 
D)$6,346

Quizplus · Accepted Answer

In LIFO (last-in, first-out) method, the latest inventory purchased is assumed to be sold first. So, the cost of goods sold is calculated by considering the cost of the latest inventory followed by the earlier inventory. The ending inventory value will be the cost of the earliest inventory available.
Using the LIFO method, the cost of goods sold for Pappy's Staff Junkets would be:
10 units @ $795 = $7,950
15 units @ $805 = $12,075
5 units @ $815 = $4,075
Total Cost of Goods Sold = $7,950 + $12,075 + $4,075 = $24,100
The cost of the remaining 7 units will be the ending inventory.
7 units @ $845 = $5,915
Therefore, the ending inventory on a LIFO basis is $5,915, which corresponds to choice B.

Pappy's Staff Junkets Has the Following Inventory Information