Pappy's Staff Junkets has the following inventory information. Assuming that a perpetual inventory system is used, what is the ending inventory on a LIFO basis?

Question

Pappy's Staff Junkets has the following inventory information.  Assuming that a perpetual inventory system is used, what is the ending inventory on a LIFO basis?

Quizplus · Accepted Answer

Using LIFO, we assume that the last items purchased are the first items sold. Therefore, the cost of goods sold will be calculated using the costs of the most recent purchases. 
Beginning inventory: $1,795
Purchases:
- $3,169 (20 @ $120.50)
- $2,190 (15 @ $146)
- $1,785 (10 @ $178.50)
- $3,085 (5 @ $617)
Total Purchases: $10,229
Cost of Goods Available for Sale: $12,024
Cost of Goods Sold: 
- 15 @ $146 = $2,190
- 10 @ $178.50 = $1,785
Total Cost of Goods Sold: $3,975
Ending Inventory: $12,024 - $3,975 = $8,049
Using LIFO, we assume that the 5 units purchased at $617 are the last units sold, so they are included in the ending inventory. 
Ending Inventory on a LIFO basis: 
- 5 @ $617 = $3,085
- 10 @ $178.50 = $1,785
Total Ending Inventory on a LIFO basis: $4,870
However, the question is asking for the ending inventory cost, not the value. Therefore, we multiply the quantity by the cost per unit: 
- 5 @ $617 = $3,085
- 10 @ $178.50 = $1,785
Total Ending Inventory on a LIFO basis: $5,870 
Therefore, the answer is B) $5,860.

Pappy's Staff Junkets Has the Following Inventory Information