Harris Company had the following balances and transactions during 2016: $$\begin{array} { | l | l | }
\hline \text { Beginning inventory } & 280 \text { units at } \$ 72 \
\hline 10 \text { March } & \text { Sold } 70 \text { units } \
\hline 10 \text { June } & \text { Purchased } 150 \text { units at } \$ 76 \
\hline 30 \text { October } & \text { Sold } 125 \text { units } \
\hline
\end{array}$$ What would the cost of sales be as reported on the income statement for the year ending 31 December 2016 if the perpetual,last-in,first-out costing method is used?

Question

Harris Company had the following balances and transactions during 2016: $$\begin{array} { | l | l | } 
\hline \text { Beginning inventory } & 280 \text { units at } \$ 72 \
\hline 10 \text { March } & \text { Sold } 70 \text { units } \
\hline 10 \text { June } & \text { Purchased } 150 \text { units at } \$ 76 \
\hline 30 \text { October } & \text { Sold } 125 \text { units } \
\hline
\end{array}$$ What would the cost of sales be as reported on the income statement for the year ending 31 December 2016 if the perpetual,last-in,first-out costing method is used?

Quizplus · Accepted Answer

Under the perpetual LIFO method, the cost of goods sold is calculated using the most recent purchases first. For the sales on March 10, 70 units are sold from the beginning inventory at $72 each. For the sales on October 30, 125 units are sold, 150 units are available from the June purchase at $76 each, so 125 units are sold at $76 each. The total cost of sales is (70 units x $72) + (125 units x $76) = $5,040 + $9,500 = $14,540.

Harris Company Had the Following Balances and Transactions During 2016