Willow Company had no beginning inventory.The company purchases 900 units of inventory in January at $5 each,1,500 units at $4 each in August,and 600 units at $6 each in November.The company sells 450 units during the year.Willow uses a periodic inventory system and the LIFO inventory costing method.What is the cost of goods sold?

Question

Quizplus · Accepted Answer

Last-in,first-out (LIFO)assumes that the inventory costs flow out in the opposite of the order the goods are received.Or,in other words,LIFO assumes that the newest goods (the last into inventory)are the first ones sold (the first out of inventory).As such,since 600 units were purchased in November and we only sold 450 during the year,we use the $6 per unit cost of the November units to calculate cost of goods sold.
Cost of goods sold = 450 units × $6 per unit = $2,700

Willow Company Had No Beginning Inventory