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Homework answers / question archive / Tool City, Inc
Tool City, Inc. had 300 cordless screwdrivers on hand on January 1, 2015, costing $45 each. Purchases and sales of cordless screwdrivers during the month of January were as follows:
| Date | Purchases | Sales |
| January 9 | 200 @ $75 | |
| January 14 | 100 @$47 | |
| January 23 | 75 @ $76 | |
| January 25 | 100 @ $48 | |
| January 30 | 75 @ $77 |
Tool City does not maintain perpetual inventory records. According to a physical count,150 cordless screwdrivers were on hand on January 31, 2015.
- What is the cost of the inventory on January 31, 2015, under the LIFO method?
As we know that under periodic system of inventory management, quantitative details of sale and purchase are not maintained.
Closing inventory is calculated by multiplying the closing inventory by the price.
As we know that the closing inventory on January 31, 2015 is 150 units and the company is following LIFO method for valuation.
Total Inventories in were
| Opening | 300 |
| January 14 | 100 |
| January 25 | 100 |
| Total | 500 |
Total Inventories out were
| January 9 | 200 |
| January 23 | 75 |
| January 30 | 75 |
| Total | 350 |
As the company follows LIFO method it will use the latest price of purchase for transferring the inventory first
| Total | 500 |
| Less: units purchased @ $48 | 100 |
| Less: units purchased @ $47 | 100 |
| Less: opening units @ 45 | 150 |
| Balance | 150 units |
The balance inventory would be be valued at $45
Closing Value of Inventory = 150 units * $45
Closing Value of Inventory = $6,750
