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The Notebook Company was formed on December 1, 2016
The Notebook Company was formed on December 1, 2016. The following information is available from the company's inventory records:
Units
Unit Cost
Balance as of May 1, 2017 ................
800
$104
Purchases:
May 7, 2017 ..........................
19,000
$105
June 11, 2017 ............................
17,000
$106
July 23, 2017 .............................
3,200
$103
December 15, 2017 .........................
5,100
$107
The company uses a periodic inventory system, and a physical inventory on December 30, 2017, shows 8,300 units on hand.
1. See information for The Notebook Company above. Using this information, the ending inventory value using FIFO is
a. $875,300
b. $870,700
c. $872,210
d. None of the above
2. See information for The Notebook Company above. Using this information, the ending inventory value using LIFO is
a. $875,300
b. $870,700
c. $872,210
d. None of the above
Expert Solution
1) Computation of Ending Inventory Value using FIFO:
December 15, 2017: $5,100*$107 = $545,700
July 23, 2017: 3,200*$103 = $329,600
Ending Inventory Value using FIFO = $875,300
So, the correct option is A "$875,300".
According to FIFO units purchased first will be sold out first.
2) Computation of Ending Inventory Value using LIFO:
May 1, 2017: 800*$104 = $83,200
May 7, 2017: (8,300-800)*$105 = $787,500
Ending Inventory Value using LIFO = $870,700
So, the correct option is B "$870,700".
According to LIFO Units purchased last will be sold out first.
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