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Inventory and cost of goods

During 2003, A Company and Z Company made the following identical purchases in the order shown:

100 units @ $10.00 each
200 units @ $10.50 each
200 units @ $11.50 each
100 units @ $12.00 each

Each company sold 400 units but A Company uses LIFO inventory costing and Z Company uses FIFO inventory costing. Assume there was no beginning inventory. Calculate the value of ending inventory for both companies and the cost of goods sold for both companies.

Solution Preview

LIFO and FIFO are pretty simple as LIFO means that the Last in is the first out and Fifo means that the first in is the first out.

So lets look at the problem:

Beginning inventory= 0
2003 purchases:

100 units @ $10.00 each = $1000
200 units @ $10.50 each = $2100
200 units @ $11.50 each = $2300
100 units @ $12.00 each = $1200

Company A:
Here we have to use the last in, first out approach so we start from the 100 units at $12 and move upward. Since we sold 400, we have to take the 100 units @ $12 ...

$2.19