LIFO question, explain the solution, urgent,,,thanks

Question

A record of transactions for the month of May was as follows: Purchases may1,(balance) [email protected] may4,[email protected] may8,[email protected] may 14, [email protected],may22, [email protected] may 29, [email protected]

 

sale may3 [email protected] may6 [email protected] may12 [email protected] may18 [email protected] may25 [email protected] Assuming that perpetual inventory records are kept in dollars, determine the inventory using LIFO.

 

Solution 8-153 100 @ $4.20 = $ 420 200 @ $4.10 = 820 100 @ $4.40 = 440 500 @ $4.55 = 2,275 $3,955

where are 100 @ $4.20  200 @ $4.10  100 @ $4.40  500 @ $4.55 come from? thanks

 

Answer 1

I think it is always useful to find the number of units remaining then applying the cost/unit to find the total inventory cost. Perpetual inventory indicates that inventory is constantly updated; therefore, the timing of the sales and purchases must be scheduled out chronologically (e.g., only the units in the May 1 balance were available for the sales on May 3, only the remaining units in the May 1 balance plus the units in the May 4 purchase were available for the sales on May 6, etc.). LIFO indicates that the most recent balance/purchases will be assumed to be sold first (e.g., the May 3 sales were from May 1 balance, the May 6 sales were from the May 4 purchases, the May 12 sales were from the May 8 purchase then the May 4 purchase, etc.). Hopefully, the following table will help you visual the flow and what is remaining at the end of the month. 

 

                           Sales in Units

Bal.+Purch. Units May 3 May 6 May 12 May18 May 25 May 31 Cost/Unit Cost

May 1          400   -300                                              100       $ 4.20     $ 420.00

May 4          1300           -1000 -100                           200       $ 4.10     $ 820.00

May 8          800                      -800                           0           $ 4.30     $ -

May 14        700                                  -400    -200     100       $ 4.40     $ 440.00

May 22        1200                                           -1200   0           $ 4.50    $ -

May 29        500                                                        500       $ 4.55     $ 2,275.00

Total           4900  300    1000  900      400      1400    900                     $ 3,955.00