Question #7: FIFO and LIFO Costs Under Perpetual Inventory System The following units of an item were available for sale during the year: Beginning inventory 21,600 units at $20.00 Sale 14,400 units at $40.00 First purchase 48,000 units at $25.20 Sale 36,000 units at $40.00 Second purchase 45,000 units at $26.40 Sale 33,000 units at $40.00 The firm uses the perpetual inventory system, and there are 31,200 units of the item on hand at the end of the year. a. What is the total cost of the ending inventory according to FIFO? $ b. What is the total cost of the ending inventory according to LIFO? $
FIFO and LIFO Costs Under Perpetual Inventory System
The following units of an item were available for sale during the year:
| Beginning inventory | 21,600 units at $20.00 |
| Sale | 14,400 units at $40.00 |
| First purchase | 48,000 units at $25.20 |
| Sale | 36,000 units at $40.00 |
| Second purchase | 45,000 units at $26.40 |
| Sale | 33,000 units at $40.00 |
The firm uses the perpetual inventory system, and there are 31,200 units of the item on hand at the end of the year.
a. What is the total cost of the ending inventory according to FIFO?
$
b. What is the total cost of the ending inventory according to LIFO?
$
Lets understand the basics.
In FIFO basis, company assumes that goods comes first in the inventory is sold first.
In LIFO basis, company assumes that goods comes last in the inventory is sold first.
In perpetual system of inventory, transaction is recorded as and when incurred rather than the periodical basis.
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