Answered: Westcoast Purveyors had 316 computer…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Westcoast Purveyors had 316 computer system in stock at the end of the year. Inventory records show the following information:

Date	Qty	Cost	Total Cost
January 1	Beginning Inventory	50	$1,468	$73,400
June 21	Purchase	50	1,192	59,600
August 1	Purchase	300	884	265,200
October 23	Purchase	200	1,216	243,200
November 16	Purchase	100	1,424	142,400
Total available for sale	700		$775,800

Using the LIFO method of inventory pricing, calculate the dollar value of the ending inventory.

Step 1

The last-in, first-out (LIFO) method assumes that the items purchased last are sold or removed from inventory first. The items in inventory at the end of the year are matched with the cost of items of the same type that were purchased earliest. Therefore, items included in the ending inventory are considered to be those from the beginning inventory plus those acquired first from purchases. This method involves taking physical inventory at the end of the year or accounting period and assigning cost in the same order in which the purchases were received. The annual inventory is given below.

Date	Qty	Cost	Total Cost
January 1	Beginning Inventory	50	$1,468	$73,400
June 21	Purchase	50	1,192	59,600
August 1	Purchase	300	884	265,200
October 23	Purchase	200	1,216	243,200
November 16	Purchase	100	1,424	142,400
Total available for sale	700		$775,800

There are 316 computer systems in stock at the end of the year. There were 50 systems on January 1, and 50 more systems acquired on June 21 for a total of

50 + 50 = 100

systems. This is less than the 316 computer systems in the inventory at the end of the year. We are concerned about

316 − 100 = computer systems

that have not yet been accounted for, so we will consider the acquisition on August 1.

There were 300 computer systems acquired on August 1. This is the number of computer systems that have not yet been accounted for. Therefore, the ending inventory of 316 computer systems is made up of all the computer systems acquired in January and June, and that were acquired on August 1.

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