Metro Computer Inc.had the following balances and transactions during 2014: What would the company's ending merchandise inventory amount be on December 31,2014 if the perpetual last-in,first-out costing method is used?

Question

Metro Computer Inc.had the following balances and transactions during 2014:  What would the company's ending merchandise inventory amount be on December 31,2014 if the perpetual last-in,first-out costing method is used?

Quizplus · Accepted Answer

Using perpetual last-in, first-out (LIFO) costing method, the ending inventory would consist of the most recent purchases. Looking at the transaction records for 2014, the most recent purchase would be the December 17th purchase of 150 units at a cost of $52 per unit. Therefore, the ending merchandise inventory amount on December 31, 2014 would be:
150 units x $52 per unit = $7,800
However, 50 units were sold on December 29th at a price of $100 per unit, which means that the cost of those units needs to be subtracted from the ending inventory amount. The cost of those 50 units would be:
50 units x $52 per unit = $2,600
Subtracting this amount from the initial ending inventory of $10,350 yields a final ending inventory amount of:
$10,350 - $2,600 = $7,750. Therefore, the correct answer is (C).