A company just starting business made the following four inventory purchases in June: A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the LIFO inventory method, the value of the ending inventory on June 30 is

Question

A company just starting business made the following four inventory purchases in June:  A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the LIFO inventory method, the value of the ending inventory on June 30 is

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Using the LIFO (Last-In, First-Out) inventory method, we assume that the most recently purchased inventory items are sold first. Therefore, we need to start by assuming that the 100 units purchased on June 30 were sold, then the 80 units purchased on June 23, then the 50 units purchased on June 15, and finally the 70 units purchased on June 5.

The cost of the 100 units purchased on June 30 is $220 ($2.20 x 100).
The cost of the 80 units purchased on June 23 is $176 ($2.20 x 80).
The cost of the 50 units purchased on June 15 is $110 ($2.20 x 50).
The cost of the 20 units purchased on June 5 is $44 ($2.20 x 20).

Total cost of inventory sold = $550 ($220 + $176 + $110 + $44).
Remaining inventory = 250 units - 100 units - 80 units - 50 units = 20 units (purchased on June 5).
Value of remaining inventory = $2.20 x 20 = $44.
Value of ending inventory on June 30 = Total cost of inventory sold + Value of remaining inventory = $550 + $44 = $594.
However, we assumed that the 100 units purchased on June 30 were sold first, which is not necessarily true. If we assume that the 70 units purchased on June 5 were sold first, then the calculation would be:

The cost of the 70 units purchased on June 5 is $154 ($2.20 x 70).
The cost of the 80 units purchased on June 23 is $176 ($2.20 x 80).
The cost of the 50 units purchased on June 15 is $110 ($2.20 x 50).
The cost of the 50 units purchased on June 30 is $110 ($2.20 x 50).

Total cost of inventory sold = $550 ($154 + $176 + $110 + $110).
Remaining inventory = 250 units - 70 units - 80 units - 50 units = 50 units (purchased on June 15).
Value of remaining inventory = $2.20 x 50 = $110.
Value of ending inventory on June 30 = Total cost of inventory sold + Value of remaining inventory = $550 + $110 = $660.

Since LIFO assumes that the most recently purchased items are sold first, and the 100 units purchased on June 30 are the most recently purchased, we should assume that they were sold first. Therefore, the value of the ending inventory on June 30 using LIFO is $594.

A Company Just Starting Business Made the Following Four Inventory