The Chalet Company uses a periodic inventory system. Beginning inventory and inv
ID: 2559816 • Letter: T
Question
The Chalet Company uses a periodic inventory system. Beginning inventory and inventory purchases for the year were as follows:
1/1
Beginning inventory
20 units @ $170 per unit
5/23
Purchased
20 units @ $125 per unit
11/5
Purchased
400 units @ $150 per unit
11/18
Purchased
100 units @ $175 per unit
At year-end, 80 units remain in inventory. What is the cost of inventory on a LIFO basis?
a.
$11,900
b.
$ 9,100
c.
$ 9,750
d.
$ 9,450
1/1
Beginning inventory
20 units @ $170 per unit
5/23
Purchased
20 units @ $125 per unit
11/5
Purchased
400 units @ $150 per unit
11/18
Purchased
100 units @ $175 per unit
Explanation / Answer
Under LIFO (Last In First Out) method of valuation of inventory, the closing Inventory is valued from oldest purchases and the cost of goods sold consists of newest inventory
So, valued of closing inventory under LIFO
= 20 units from beginning inventory + 20 units from 5/23 purchases + (80 – 20 – 20) units from 11/5 purchases
= 20 x $170 + 20 x $125 + 40 x $150
= $11,900
So, option a is the correct option