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A company just starting business made the following four inventory purchases in June: June 1 150 Units $780 June 10 200 units $1 170 June 15 200 units $1 260 June 28 150 units $990 TOTAL $4 200 A physical count of inventory on June 30 reveals that there are 250 units on hand. Using the LIFO inventory method, the value of the ending inventory on June 30 is: Group of answer choices $2 835. $1,620. $2,580. $1,365.

Question

A company just starting business made the following four inventory purchases in June:

June 1

150 Units

$780

June 10

200 units

$1 170

June 15

200 units

$1 260

June 28

150 units

$990

TOTAL

$4 200

A physical count of inventory on June 30 reveals that there are 250 units on hand.

Using the LIFO inventory method, the value of the ending inventory on June 30 is:

Group of answer choices

$2 835.

$1,620.

$2,580.

$1,365.

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Solution

Using the LIFO (Last In, First Out) inventory method, the value of the ending inventory on June 30 can be calculated as follows:

  1. According to LIFO, the last items purchased are the first ones to be sold. So, we start with the last purchase made on June 28 of 150 units for $990.

  2. The physical count of inventory on June 30 reveals that there are 250 units on hand. This means 250 units were not sold and are still in the inventory.

  3. Subtract the 150 units purchased on June 28 from the 250 units on hand. This leaves 100 units that must have come from the previous purchase on June 15.

  4. The cost per unit for the June 15 purchase is 1,260/200units=1,260 / 200 units = 6.30 per unit.

  5. Multiply the remaining 100 units by the cost per unit from the June 15 purchase: 100 units * 6.30/unit=6.30/unit = 630.

  6. Add the cost of the units from the June 28 purchase (990)tothecostoftheunitsfromtheJune15purchase(990) to the cost of the units from the June 15 purchase (630).

  7. The total cost of the ending inventory on June 30 is 990+990 + 630 = $1,620.

So, the value of the ending inventory on June 30 using the LIFO method is $1,620.

This problem has been solved

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