Question

Willow Company had no beginning inventory. The company purchases 900 units of inventory in January at $5 each, 1,500 units at $4 each in August, and 600 units at $6 each in November. The company sells 450 units during the year. Willow uses a periodic inventory system and the LIFO inventory costing method. What is the cost of goods sold?

Answer 1

Answer: $2700

Explanation: Under the LIFO inventory method the transactions are recorded on the basis that goods which are most frequent purchase are also sold first. Under the periodic inventory method the accounts are updated at a specific point , generally month end, and not on continuous basis like in perpetual system.

so the cost of goods sold of 450 units will be at latest prices,thus :-

COGS = (450 units)*($6) = $2700