Perpetual inventory using LIFO

Question

Beginning inventory, purchases, and sales for Item 88-HX are as follows:

Date	Line Item Description	Value
July 1	Inventory	108 units @ $24
July 8	Sale	86 units
July 15	Purchase	120 units @ $26
July 27	Sale	101 units
Assuming a perpetual inventory system and using the last-in, first-out (LIFO) method, determine (a) the cost of goods sold on July 27 and (b) the inventory on July 31.

a. Cost of goods sold on July 27 fill in the blank 1 of 2

b. Inventory on July 31 fill in the blank 2 of 2

GPT-4o mini · Answer

To determine the cost of goods sold (COGS) on July 27 and the inventory on July 31 using the perpetual LIFO method, we need to analyze each transaction step by step.

Inventory Transactions:

Beginning Inventory (July 1):
- 108 units @ $24
Sale (July 8):
- Sold 86 units
- Under LIFO, the last items purchased are sold first; since there are no recent purchases before this sale, we use the beginning inventory.
- COGS for July 8 = 86 units @ $24 = $2,064
Inventory after July 8 Sale:
- Remaining:
  - 108 - 86 = 22 units @ $24
Purchase (July 15):
- Purchase 120 units @ $26
- New inventory after purchase:
  - 22 units @ $24
  - 120 units @ $26
Total Inventory after July 15 Purchase:
- 22 units @ $24
- 120 units @ $26
Sale (July 27):
- Sold 101 units
- Under LIFO, we will sell from the most recent purchase first. We will sell all 120 units bought on July 15, but only need to sell 101 units. Therefore, we will take 101 units from the July 15 purchase.
- COGS for July 27 = 101 units @ $26 = $2,626
Inventory after July 27 Sale:
- Remaining:
  - 120 - 101 = 19 units @ $26
  - Plus the 22 units @ $24
  - Total remaining:
    - 19 units @ $26
    - 22 units @ $24

Calculation of Inventory on July 31:

Remaining Inventory:
- 19 units @ $26 = $494
- 22 units @ $24 = $528
Total Inventory Value (July 31):
- $494 + $528 = $1,022

Final Results:

a. Cost of goods sold on July 27 = $2,626
b. Inventory on July 31 = $1,022