Addison, Inc. uses a perpetual inventory system. The following is information about one inventory item for the month of September: If Addison uses LIFO, the cost of the ending merchandise inventory on September 30 is
A) $800
B) $650
C) $750
D) $700

Question

Addison, Inc. uses a perpetual inventory system. The following is information about one inventory item for the month of September:  If Addison uses LIFO, the cost of the ending merchandise inventory on September 30 is
A) $800 
B) $650 
C) $750 
D) $700

Quizplus · Accepted Answer

Using LIFO, we assume that the last items purchased are the first ones sold.

So, we start with the 20 units purchased on September 4 at $50 each, the 15 units purchased on September 15 at $60 each, and the 10 units purchased on September 25 at $70 each.

We sell a total of 35 units during the month, leaving us with 10 units in ending inventory.

The cost of those 10 units would be the cost of the last units purchased, which were 10 units at $70 each for a total of $700.