Quan uses a periodic inventory system.At the end of April, Quan had 20 units on hand. If Quan uses the LIFO inventory method, how much is inventory on the balance sheet as of April 30?

Question

Quan uses a periodic inventory system.At the end of April, Quan had 20 units on hand.  If Quan uses the LIFO inventory method, how much is inventory on the balance sheet as of April 30?

Quizplus · Accepted Answer

Since Quan uses LIFO, the last units purchased are assumed to be sold first. Thus, the cost of those units will be used to calculate the value of ending inventory. 
Assuming the following purchases and costs:

- April 10: 15 units at $5 each
- April 20: 10 units at $6 each

The cost of the 10 units purchased on April 20 is higher than the cost of the 15 units purchased on April 10, so those will be assumed to be sold first. The remaining 10 units on hand at the end of the month will come from the April 10 purchase, at a cost of $5 each.
Thus, the value of ending inventory will be: 
10 units x $5 per unit = $50. 
Therefore, the correct answer is B.

Quan Uses a Periodic Inventory System