[wildboar]

I understand the principle of FIFO and LIFO I think. LIFO means that the last items purchased would be the first to be sold. However, I can't solve the following question, help is needed.

A companys movements for the month of June are as follows :

June 1 - Units in 200 - Units Out 0 - Unit price (£) 20
June 8 - Units in 100 - Units Out 0 - Unit price (£) 30
June 15 - Units in 0 - Units Out 250 Unit price not given
June 22 - Units in 160 - Units out 0 - Unit price (£) 25
June 30 - Units in 0- Units out 170 - Unit price not given

If stocks were valued using the LIFO method, what would the stock figure be at close of business on June 30th?


a) £1200
b) £600
c) £1000
d) £800

I've been told that the answer is d but I cannot for the life of me work out why, please can someone tell me, driving me up the wall!!

Cheers

[CaptainForest]

Assuming Periodic Inventory system…

June 1 - Units in 200 - Units Out 0 - Unit price (£) 20
June 8 - Units in 100 - Units Out 0 - Unit price (£) 30
June 15 - Units in 0 - Units Out 250 Unit price not given
June 22 - Units in 160 - Units out 0 - Unit price (£) 25
June 30 - Units in 0- Units out 170 - Unit price not given

On June 1, you buy 200 units at £20 so a total inventory balance of £4,000
On June 8, you buy another £3,000

Total so far in inventory: £7,000

On June 22, you bought 160 units x £25 = $4,000

Total inventory that you have available for sale = £11,000

You sold a total of 250 units on June 15 and 170 units on June 30. So you sold 420 units. We assume you sold the 160 from June 22 and the 100 from June 8 and the rest from June 1.

420 Sold
- 160 from June 22
- 100 from June 8
= 160 units more to account for of the 200 from June 1

That leaves 40 units left from June 1.

So Ending inventory is 40 units x £20 = £800


While the calculation would be a bit different if we are talking about a Perpetual inventory system, the answer in this case will still be £800.

[wildboar]

Assuming Periodic Inventory system…

June 1 - Units in 200 - Units Out 0 - Unit price (£) 20
June 8 - Units in 100 - Units Out 0 - Unit price (£) 30
June 15 - Units in 0 - Units Out 250 Unit price not given
June 22 - Units in 160 - Units out 0 - Unit price (£) 25
June 30 - Units in 0- Units out 170 - Unit price not given

On June 1, you buy 200 units at £20 so a total inventory balance of £4,000
On June 8, you buy another £3,000

Total so far in inventory: £7,000

On June 22, you bought 160 units x £25 = $4,000

Total inventory that you have available for sale = £11,000

You sold a total of 250 units on June 15 and 170 units on June 30. So you sold 420 units. We assume you sold the 160 from June 22 and the 100 from June 8 and the rest from June 1.

420 Sold
- 160 from June 22
- 100 from June 8
= 160 units more to account for of the 200 from June 1

That leaves 40 units left from June 1.

So Ending inventory is 40 units x £20 = £800


While the calculation would be a bit different if we are talking about a Perpetual inventory system, the answer in this case will still be £800.

Captain, I thank you.

[CaptainForest]

You're welcome