Q29PGA_2 - Horngren'S Financial And Managerial Accounting

Question

Steel Mill began August with 50 units of iron inventory that cost \(35 each. During August, the company completed the following inventory transactions:

                                                  Units                Unit Cost               Unit Sales Price

Aug. 3            Sale                      45                                                            \) 85

8                     Purchase              90                      $ 54

21                   Sale                       85                                                               88

30                   Purchase              15                          58

 

Requirements

2. Prepare a perpetual inventory record for the merchandise inventory using the LIFO inventory costing method.

Step-by-Step Solution

Answer

Total ending inventory under the LIFO method comes out to be $1,315.

Step-by-Step Solution Step 1: LIFO Method

The LIFO method is just the opposite of the FIFO method. Under this system, the goods issued are valued at the current prices. Thus the issued inventory is valued at the recently purchased cost assuming that the inventories are being issued following the last-in-first-out sequence.

Step 2: Perpetual inventory table under the LIFO method

	Purchases			Cost of goods sold			Inventory on hand
Date	Qty	Unit cost	Total Cost	Qty	Unit cost	Total Cost	Qty	Unit Cost	Total Cost
Aug 1							50	$35	$1,750
Aug 3				45	$35	$1,575	5	$35	$175
Aug 8	90	$54	$4,860				5 90	$35 $54	$5,035
Aug 21				85	$54	$4,590	5 5	$35 $54	$445
Jan 26	15	$58	$870				5 5 15	$35 $54 $58	$1,315
Total	105		$5,730	130		$6,165	5 5 15	$35 $54 $58	$1,315