Question

Melbourne Company uses the perpetual inventory method. Melbourne purchased 1,800 units of inventory that cost $11.75 each. At a later date the company purchased an additional 1,900 units of inventory that cost $12.25 each. If Melbourne uses a LIFO cost flow method, and sells 2,100 units of inventory, the amount of ending inventory appearing on the balance sheet will be:\

Answer 1

Answer:

$18,800.

Explanation:

LIFO method of Inventory Cost Flow assumes that the recently purchased goods are sold first. The company sold 2,100 units. 1,900 out of 2,100 were recently purchased at a cost of $12.25 each, and the remaining 200 units are those that were purchased earlier at a cost of $11.75. It means that the company is just left with 1,600 units (1,800 - 200) that were Purchase at a early date because all the recently purchased stock has been sold out whereas 200 has been sold out from that of earlier ones.

⇒ Ending Inventory = 1,600 * 11.75 = $18,800.