Charter Company,which uses the perpetual inventory method,purchases different letters for resale.Character had a beginning inventory comprised of seven units at $4 per unit.The company purchased five units at $6 per unit in February,sold seven units in October,and purchased two units at $7 per unit in December. If Charter Company uses the LIFO method,what is the cost of its ending inventory?

Question

Quizplus · Accepted Answer

Under the LIFO (Last-In, First-Out) method, the most recently purchased items are sold first. At the end of the period, the ending inventory consists of the oldest costs. Charter Company's ending inventory would include 7 units from the beginning inventory at $4 each (7 units * $4 = $28) and 2 units from the February purchase at $6 each (2 units * $6 = $12), totaling $40 (not an option given). However, considering the options provided and the details, it seems there might be a mistake in the calculation or the interpretation of the options. Correctly recalculating based on the LIFO method: - Sold 7 units: 2 units from December purchase ($7 each) and 5 units from February purchase ($6 each). - Ending inventory: 7 units from beginning inventory ($4 each) = $28. It appears there was an error in the initial explanation. The correct calculation for ending inventory under LIFO, considering the sales and purchases throughout the year, should actually focus on the units remaining. With 7 units sold and a total of 14 units acquired throughout the year (7 beginning + 5 February + 2 December), 7 units remain. Under LIFO, these would be the 7 oldest units (all from the beginning inventory at $4 each), totaling $28. However, none of the provided choices exactly match this corrected calculation, suggesting a possible misunderstanding of the question or a typographical error in the options or the explanation. Given the options and the scenario described, the closest correct choice based on standard LIFO calculation principles would be option B) $34, assuming there might have been a misinterpretation in the calculation process or an error in the provided options.

Charter Company,which Uses the Perpetual Inventory Method,purchases Different Letters for Resale.Character