### Cambrige AS and A Level Accounting Notes (9706)/ ZIMSECĀ  Advanced Accounting Level Notes: Inventory valuation: Inventory valuation methods: Last In First Out (LIFO): Example Question

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#### The Solution

• Under LIFO it is assumed the first items bought are sold last
 Date Receipts Sales Balance Units Unit Cost (\$) Total Cost(\$) Units Unit Cost(\$) Total Cost(\$) Units Unit Cost (\$) Total Cost(\$) Op/Bal 50 30.00 1 500 Jan 8 30 30.00 900 20 30.00 600 Jan 10 100 30.00 3 000 120 30.00 3 600 Jan 12 80 30.00 2 400 40 30.00 1 200 Jan 21 120 30.50 120 30.50 3 660 40 30.00 1 200 160 4 860 Jan 28 90 30.50 2 745 30 30.50 915 - - - 40 30.00 1 200 90 2 745 70 2 115 Feb 1 30 30.50 915 20 30.00 600 20 30.00 600 - - 50 1 515 20 600 Feb 14 150 31.00 4 650 150 31.00 4 650 20 30.50 610 170 5 260 Feb 23 100 31.00 3100 50 31.00 1 550 - 30.50 0 20 30.50 610 100 3 100 70 2 160 Mar 1 30 31.00 930 20 31.00 620 - - - 20 30.50 610 30 930 40 1 230 Mar 4 120 31.50 3 780 120 31.50 3 780 20 31.00 620 20 30.50 610 160 5 010 Mar 19 120 31.50 3 780 20 31.00 620 - - - 20 30.50 610 120 3 780 40 1 230 Mar 23 100 32.00 3 200 100 32.00 3 200 20 31.00 620 20 30.50 610 140 4 430 Mar 27 100 32.00 3200 20 30.50 610 20 31.00 620 - - - 120 3 820 20 610
• Since these are the only transactions that took place according to the question
• On 31 March 20×8 the inventory balance would be:
• 20 units @ \$30.50 per unit this translates to:
• \$610
• Here we used the continuous method i.e. every time there was a purchase an issue we updated the inventory record
• Using a periodic record:
 \$ Total Sales for the quarter 640 Purchases and Opening inventory 620 Remaining inventory 20
• There are 20 units left with LIFO we assume this is from the oldest inventory which was the Opening Inventory:
• So using the periodic method the value of inventory would be:
• 20 units @ \$30
• \$600
• As illustrated above the Period-end and Continuous methods of record keeping can yield different results

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