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Boomerang Co had 200 units in inventory at 30 November 20X1 valued at $800. During December, it made the following purchases and sales:2/12: Purchased 1,000 units @ $5 each5/12: Sold 700 units @ $7.50 each12/12: Purchased 800 units @ $6.20 each15/12: Purchased 300 units @ $6.60 each21/12: Sold 400 units @ $8.00 each28/12: Sold 500 units @ $8.20 eachCalculate the closing inventory value using LIFO.

Question

Boomerang Co had 200 units in inventory at 30 November 20X1 valued at 800.DuringDecember,itmadethefollowingpurchasesandsales:2/12:Purchased1,000units@800. During December, it made the following purchases and sales:2/12: Purchased 1,000 units @ 5 each5/12: Sold 700 units @ 7.50each12/12:Purchased800units@7.50 each12/12: Purchased 800 units @ 6.20 each15/12: Purchased 300 units @ 6.60each21/12:Sold400units@6.60 each21/12: Sold 400 units @ 8.00 each28/12: Sold 500 units @ $8.20 eachCalculate the closing inventory value using LIFO.

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Solution

To calculate the closing inventory value using the Last-In, First-Out (LIFO) method, we need to consider the most recent purchases first when accounting for the cost of goods sold (COGS).

Here's how to calculate it:

  1. Calculate the total units sold: 700 units (5/12) + 400 units (21/12) + 500 units (28/12) = 1,600 units.

  2. Determine the cost of the units sold using LIFO:

    • For the 500 units sold on 28/12, these would have come from the 300 units purchased on 15/12 @ 6.60eachand200unitsfromthe800unitspurchasedon12/12@6.60 each and 200 units from the 800 units purchased on 12/12 @ 6.20 each. The cost is (300 * 6.60)+(200∗6.60) + (200 * 6.20) = 1,980+1,980 + 1,240 = $3,220.

    • For the 400 units sold on 21/12, these would have come from the remaining 600 units purchased on 12/12 @ 6.20each.Thecostis400∗6.20 each. The cost is 400 * 6.20 = $2,480.

    • For the 700 units sold on 5/12, these would have come from the 1,000 units purchased on 2/12 @ 5each.Thecostis700∗5 each. The cost is 700 * 5 = $3,500.

  3. Add up the cost of the units sold to get the total COGS: 3,220+3,220 + 2,480 + 3,500=3,500 = 9,200.

  4. Calculate the cost of the remaining inventory:

    • There are 300 units left from the 1,000 units purchased on 2/12 @ 5each.Thecostis300∗5 each. The cost is 300 * 5 = $1,500.

    • There are 200 units left in inventory from 30 November 20X1 valued at $800.

  5. Add up the cost of the remaining inventory to get the closing inventory value: 1,500+1,500 + 800 = $2,300.

So, the closing inventory value using LIFO is $2,300.

This problem has been solved

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