Asked by KALLA RAJU SRAVAN MS on Jul 28, 2024
Verified
If Addison uses LIFO, the September 30 inventory balance is
A) $800
B) $650
C) $750
D) $700
LIFO
Last In, First Out, an inventory valuation method where the last items added to inventory are the first ones considered sold.
Inventory Balance
The total value of all inventory items held by a company at the end of a reporting period, including raw materials, work-in-progress, and finished goods.
- Calculate inventory balances using different costing methods such as LIFO, FIFO, and average cost under both perpetual and periodic systems.
Verified Answer
MC
Mahak ChhajedAug 02, 2024
Final Answer :
C
Explanation :
To calculate the September 30 inventory balance using LIFO, we need to start with the most recent purchases and work backwards.
The September 24 purchase of 10 units at $70 each gives us a total cost of $700.
The September 15 purchase of 20 units at $60 each gives us a total cost of $1,200.
Since we are using LIFO, we assume that the last units purchased are the first units sold. Therefore, the 10 units purchased on September 24 are the first units sold, leaving us with 20 units left in inventory. These 20 units include the 10 units purchased on September 15 and 10 units from the beginning inventory.
20 units at $37.50 each (total cost of $750) is the September 30 inventory balance using LIFO.
The September 24 purchase of 10 units at $70 each gives us a total cost of $700.
The September 15 purchase of 20 units at $60 each gives us a total cost of $1,200.
Since we are using LIFO, we assume that the last units purchased are the first units sold. Therefore, the 10 units purchased on September 24 are the first units sold, leaving us with 20 units left in inventory. These 20 units include the 10 units purchased on September 15 and 10 units from the beginning inventory.
20 units at $37.50 each (total cost of $750) is the September 30 inventory balance using LIFO.
Learning Objectives
- Calculate inventory balances using different costing methods such as LIFO, FIFO, and average cost under both perpetual and periodic systems.
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