Perpetual Inventory Using LIFO
Beginning inventory, purchases, and sales data for prepaid cell phones for May are as follows:
| Inventory | Purchases | Sales | |
| May 1- 1,550 units at $44 | May 10- 720 units at $45 | May 12- 1,200 units | |
| May 20- 1200 Units at $48 | May 14- 830 units | ||
| May 31- 1,000 units |
a. Assuming that the perpetual inventory system is used, costing by the LIFO method, determine the cost of merchandise sold for each sale and the inventory balance after each sale.
b. Based upon the preceding data, would you expect the inventory to be higher or lower using the first-in, first-out method?
A. Assuming that the perpetual inventory system is used, costing by the LIFO method, determine the cost of merchandise sold for each sale and the inventory balance after each sale.
| Date | Inventory | Purchases | Sales | Balance |
| May 1- | 1550 units @ $44 =68,200 | 720 units @ $45 =32,400 | May 12- 1,200 units
720@45=32400 480@44=21120 |
1070 @44=47080 |
| May 14 | 1070 @44=47080 | 830@44=36520 | 240@44=10560 | |
| May 20 | 240@44=10560 | 1200@48=57600 | 240@44=10560
1200@48=57600 |
|
| May 31 | 240@44=10560
1200@48=57600 |
1000@48=48000 | 240@44=10560
200@48=9600 |
|
| 20160
(10560+9600) |
b. Based upon the preceding data, would you expect the inventory to be higher or lower using the first-in, first-out method
Table showing FIFO ( First-in, first-out method)
| Date | Inventory | Purchases | Sales | Balance |
| May 1- | 1550 units @ $44 =68,200 | 720 units @ $45 =32,400 | May 12- 1,200 units
1200@44=52800 |
720@45=32,400
350@44=15400 |
| May 14 | 720@45=32,400
350@44=15400 |
350@44=15400 480@45=21600 | 240@45=10800 | |
| May 20 | 240@45=10800 | 1200@48=57600 | 240@45=10800
1200@48=57600 |
|
| May 31 | 240@45=10800
1200@48=57600 |
240@45=108000
760@48=36480 |
440@48=21120 | |
| 21120 |
Inventory cost would be higher in FIFO method
