At the beginning of July, Escape Luggage, which uses a periodic inventory system, holds 15 units of its only product with a per-unit cost of $420. During July, Escape sells 40 units. A summary of purchases during the current period follows:
Assume that Escape utilizes the LIFO method and instead of making the third purchase during July, the company allows its inventory level to decline by delaying the third purchase until August.
Compute cost of goods sold for July under both scenarios:
a. If the third purchase is made during July
b. If the third purchase is delayed to August
Discuss the effect on July profit if the company delays the third purchase until August.

Question

At the beginning of July, Escape Luggage, which uses a periodic inventory system, holds 15 units of its only product with a per-unit cost of $420. During July, Escape sells 40 units. A summary of purchases during the current period follows:
  Assume that Escape utilizes the LIFO method and instead of making the third purchase during July, the company allows its inventory level to decline by delaying the third purchase until August.
Compute cost of goods sold for July under both scenarios:
a. If the third purchase is made during July
b. If the third purchase is delayed to August
Discuss the effect on July profit if the company delays the third purchase until August.

Quizplus · Accepted Answer

The Answer of At the beginning of July, Escape Luggage, which uses a periodic inventory system, holds 15 units of its only product with a per-unit cost of $420. During July, Escape sells 40 units. A summary of purchases during the current period follows:
  Assume that Escape utilizes the LIFO method and instead of making the third purchase during July, the company allows its inventory level to decline by delaying the third purchase until August.
Compute cost of goods sold for July under both scenarios:
a. If the third purchase is made during July
b. If the third purchase is delayed to August
Discuss the effect on July profit if the company delays the third purchase until August.

At the Beginning of July, Escape Luggage, Which Uses a Periodic