Alphabet Company buys different letters for resale.It buys A thru G on January 1 at $4 per letter,and sells A and E on January 15.On February 1,it buys H thru L at $6 per letter and sells D,H and J on February 9.It then buys M thru R on March 1 at $7 per letter and sells N on March 19.If the company uses the LIFO method on a perpetual basis,what is the cost of its ending inventory?
A)$58
B)$67
C)$72
D)$76

Question

Quizplus · Accepted Answer

Using LIFO method, the last letters purchased are assumed to be sold first. 
Therefore, the cost of ending inventory would be:
- Letters O, P, Q, and R purchased at $7 each = $28
- Letters I and G purchased at $6 each = $12
- Letters C, B, and A purchased at $4 each = $12
Total cost of ending inventory = $28 + $12 + $12 = $52
However, since letter E was sold on January 15, the cost of the remaining letter F and G would be added to the cost of ending inventory. 
- Letter F purchased at $4 each = $4
- Letter G purchased at $4 each = $4
Adjusted cost of ending inventory = $52 + $4 + $4 = $60
Therefore, the best choice is B, $67 is not the correct choice as it is higher than the adjusted cost of ending inventory.

Alphabet Company Buys Different Letters for Resale