Use the information below to answer the following questions:
Diligent Ltd had 5 units of the commodity Algo on hand at 1 September 2012. The following purchases and sales were made during September:

$\begin{array}{llcc}
\text { Opening Balance } & \text { Purchases } & \text { Sales } \
\text {September1\quad 5 units@\$200 $ \$ $ } & \text {September3\quad 5 units @ \$240 $ \quad $}& \text {September $ 7 \quad 7 $ units}\
\text { } & \text { 12\quad 3 units@\$260} & \text { 27\quad 5 units } \
\text { } & \text {25\quad 6 units@\$200 } & \text { } \
\end{array}$
-What was the value of ending inventory of Algo,using the LIFO assumption in a periodic inventory system?

Question

Use the information below to answer the following questions:
Diligent Ltd had 5 units of the commodity Algo on hand at 1 September 2012. The following purchases and sales were made during September:

$\begin{array}{llcc}
  \text { Opening Balance } &  \text { Purchases } &  \text { Sales }   \
 \text {September1\quad 5 units@\$200 $ \$ $  } & \text {September3\quad 5 units @ \$240 $ \quad $}&  \text {September $ 7 \quad 7 $ units}\
 \text {  } & \text {  12\quad 3 units@\$260} & \text { 27\quad 5 units } \
 \text {  } & \text {25\quad 6 units@\$200  } & \text {  } \
\end{array}$
-What was the value of ending inventory of Algo,using the LIFO assumption in a periodic inventory system?

Quizplus · Accepted Answer

Using LIFO in a periodic inventory system, the cost of the most recent purchases are matched against the sales first before the costs of the beginning inventory and earlier purchases.

Thus, the cost of sales for the 7 units sold on September 7 and the 5 units sold on September 27 are calculated as follows:
7 units @ $260 = $1,820
5 units @ $200 = $1,000
Total cost of sales = $2,820

Next, we need to calculate the cost of ending inventory. 
The remaining units on hand after the September 27 sale are 5 units from the September 3 purchase and 1 unit from the September 12 purchase, or a total of 6 units.
Cost of 5 units @ $240 = $1,200
Cost of 1 unit @ $260 = $260
Total cost of ending inventory = $1,460

Therefore, the value of ending inventory of Algo using the LIFO assumption in a periodic inventory system is $1,460. Thus, the best choice is B.

Use the Information Below to Answer the Following Questions: Diligent

Use the Information Below to Answer the Following Questions:
Diligent