Vibe Pty Ltd uses the periodic inventory method and had the following inventory information available for 2020: Units Unit cost Total cost 1/1 Beginning inventory 15 $4.00 $ 60 20/1 Purchase 60 $4.40 264 25/7 Purchase 30 $4.20 126 20/10 Purchase 45 $4.80 216 150 $666 A physical count of inventory on 31 December revealed that there were 50 units on hand. Answer the following independent questions and show computations supporting your answers. 3-(C) Calculate the value of the ending inventory on 31 December assuming that the company uses the LIFO method.
Question
Vibe Pty Ltd uses the periodic inventory method and had the following inventory information available for 2020:
Units Unit cost Total cost
1/1 Beginning inventory 15 60
20/1 Purchase 60 $4.40 264
25/7 Purchase 30 $4.20 126
20/10 Purchase 45 $4.80 216
150 $666
A physical count of inventory on 31 December revealed that there were 50 units on hand.
Answer the following independent questions and show computations supporting your answers.
3-(C) Calculate the value of the ending inventory on 31 December assuming that the company uses the LIFO method.
Solution
The LIFO (Last-In, First-Out) method assumes that the most recent inventory items are sold first.
Here's how to calculate the value of the ending inventory at 31 December using the LIFO method:
Step 1: Determine the number of units sold Total units purchased and beginning inventory: 15 (beginning) + 60 (20/1 purchase) + 30 (25/7 purchase) + 45 (20/10 purchase) = 150 units Units on hand at 31 December: 50 units Units sold = Total units - Units on hand = 150 units - 50 units = 100 units
Step 2: Calculate the cost of goods sold (COGS) The first 100 units sold would be the 45 units from the last purchase (20/10 purchase), 30 units from the 25/7 purchase, and 25 units from the 20/1 purchase.
COGS = (45 units * 4.20) + (25 units * 216 + 110 = $452
Step 3: Calculate the value of the ending inventory The remaining 50 units would be from the first purchases (35 units from 20/1 purchase and 15 units from beginning inventory).
Ending inventory = (35 units * 4.00) = 60 = $214
So, the value of the ending inventory at 31 December using the LIFO method is $214.
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