Melbourne Company uses the perpetual inventory system and LIFO cost flow method. Melbourne purchased 600 units of inventory that cost $2.75 each. At a later date, the company purchased an additional 700 units of inventory that cost $3.25 each. If the company sells 900 units of inventory, what amount of ending inventory will appear on a balance sheet prepared immediately after the sale?

Question

Quizplus · Accepted Answer

Using the LIFO method, the last units purchased are assumed to be sold first. Therefore, the cost of goods sold will be calculated as follows:
Cost of goods sold = 600 units x $2.75 + 300 units x $3.25 = $2,550
The remaining 400 units will be considered as the ending inventory, which will have a cost of:
Ending inventory = 400 units x $3.25 = $1,300

Therefore, the ending inventory that will appear on the balance sheet will be $1,300. Option C is the best choice.

Melbourne Company Uses the Perpetual Inventory System and LIFO Cost