Accounting: Inventory Question

Question

Charter Company, which uses the perpetual inventory method, purchases different letters for resale. Character had a beginning inventory comprised of eight units at $4 per unit. The company purchased five units at $6 per unit in February, sold eleven units in October, and purchased two units at $7 per unit in December.

 

Use the information above to answer the following question. If Charter Company uses the LIFO method, what is the cost of its ending inventory?
$54
$22
$56
$76

 

Use the information above to answer the following question. If Charter Company uses the LIFO method, what is the cost of goods sold for the year?
$54
$22
$56
$76

Answer 1

LIFO means "Last in First Out"

The newest items are sold first.

 

Inventory:  Cost per:   Value:    Purchased:

8               $4             $32      Beginning

5                 6               30      February

2                 7               14      December

                                 -------

                                   $76 Total Inventory purchased value

 

Sold 11 units in October:

That would be 5 @ $6 each = $30

                     6 @ $4 each = $24

                                         -------

                                          $54 value sold

 

Remaining:  76-54 = $22

Note:  What is left is the 2 purchased in December for $14

and 2 of the beginning inventory for $8.   14 + 8 = 22

 

As for cost of goods sold for the year... Already answered:  $54

Answer 2

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