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Perpetual Inventory Using LIFO Beginning inventory, purchases, and sales data for DVD players are as follows: November 1 Inventory 120 units at $39 10 Sale 90 units 15 Purchase 140 units at $40 20 Sale 110 units 24 Sale 45 units 30 Purchase 160 units at $43 The business maintains a perpetual inventory system, costing by the last-in, first-out method. Determine the cost of goods sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 4. Under LIFO, if units are in inventory at two different costs, enter the units with the HIGHER unit cost first in the Cost of Goods Sold Unit Cost column and LOWER unit cost first in the Inventory Unit Cost column.

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Answer:

COGS and inventory balance under LIFO (last in, first out):

November 10 sale

  • COGS = 90 x $39 = $3,510
  • inventory balance after sale = $1,170

November 20 sale

  • COGS = 110 x $40 = $4,400
  • inventory balance after sale = $2,370

November 24 sale

  • COGS = 30 x $40 = $1,200
  • COGS = 15 x $39 = $585
  • total COGS = $1,785
  • inventory balance after sale = $585

When calculating costs under LIFO, we must use the cost of the last units purchased for determining cost of goods sold. This method is generally used when the price of the goods tends to increase during the period.

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