Metro Computer Company had the following balances and transactions during 2014. What would the company's Inventory amount be on the December 31, 2014 balance sheet if the perpetual Last-In, First-Out costing method is used? (Answers are rounded to the nearest dollar.)

Question

Metro Computer Company had the following balances and transactions during 2014.  What would the company's Inventory amount be on the December 31, 2014 balance sheet if the perpetual Last-In, First-Out costing method is used? (Answers are rounded to the nearest dollar.)

Quizplus · Accepted Answer

Using the perpetual LIFO method, the items most recently purchased are assumed to be the first items sold. Therefore, the cost of goods sold is calculated using the most recent purchase prices, and the inventory balance is composed of the oldest purchases. 
Using this method, the cost of goods sold for 2014 would be:
($2,000 x 10) + ($2,250 x 12) + ($2,500 x 6) = $57,000
To determine the value of the inventory on December 31, 2014, we need to subtract the cost of goods sold from the total cost of inventory purchased throughout the year:
$62,500 - $57,000 = $5,500
Finally, since we are using LIFO, we need to assume that the cost of the remaining inventory is made up of the oldest purchases. In this case, that would be:
($1,500 x 20) + ($1,750 x 8) = $35,000
Therefore, the inventory amount on the December 31, 2014 balance sheet would be:
$35,000 + $5,500 = $40,500, which when rounded to the nearest dollar is $7,750.

Metro Computer Company Had the Following Balances and Transactions During