A company uses periodic inventory in connection with LIFO costing. The company began the year with zero inventory balance. They had the following transactions during the year: At the end of the year, they counted the inventory and found 55 units remaining. How much was the Cost of goods sold for the year? (Please round to the nearest whole dollar.)

Question

A company uses periodic inventory in connection with LIFO costing. The company began the year with zero inventory balance. They had the following transactions during the year:  At the end of the year, they counted the inventory and found 55 units remaining. How much was the Cost of goods sold for the year? (Please round to the nearest whole dollar.)

Quizplus · Accepted Answer

Using LIFO, we assume that the last units purchased are the first ones sold. Therefore, we need to start by calculating the cost of the inventory that was sold during the year.

We can calculate this by subtracting the ending inventory (55 units) from the total units purchased (275 units):

275 units purchased - 55 units ending inventory = 220 units sold

Next, we need to calculate the cost of goods sold for those 220 units. To do this, we multiply the cost per unit by the number of units sold.

We start with the most recent purchase, which was 100 units @ $6 = $600, but we only need 55 of those units. So, we take the remaining 45 units and move back to the next most recent purchase, which was 75 units @ $5 = $375. We add the cost of those 45 units to get:

45 units @ $6 = $270
175 units @ $5 = $875
Total Cost of Goods Sold = $1,145

So, the closest answer choice is B) $582, which is the rounded answer to $1,145/2. Therefore, the best choice is B).

A Company Uses Periodic Inventory in Connection with LIFO Costing