Merchandise Inventory
LIFO
(Last In First Out)
Under the LIFO (last in first out) method of inventory costing, cost of goods sold comes from the latest—the most recent—purchases. Ending inventory’s cost comes from the oldest costs of the period. LIFO costing does not follow the flow of goods for most companies. LIFO often results in the highest cost of goods sold and the lowest income tax which is LIFO’s main advantage.
Visit the following website to read more about LIFO:
http://www.accd.edu/sac/slac/ppointshows/acct/LIFO.htm
Use your knowledge of the LIFO valuation method to analyze the following chart. On the lines below, journalize the transactions that took place on the dates in the chart.
SUNRISE SKI PARKAS |
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Date |
Purchases |
Cost of Goods Sold |
Inventory on Hand |
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Quantity |
Unit Cost |
Total Cost |
Quantity |
Unit Cost |
Total Cost |
Quantity |
Unit Cost |
Total Cost |
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Nov.
1 |
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1 |
$40 |
$40 |
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5 |
6 |
$45 |
$270 |
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1 |
40 |
40 |
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6 |
45 |
270 |
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15 |
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4 |
$45 |
$180 |
1 |
40 |
40 |
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2 |
45 |
90 |
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26 |
7 |
50 |
350 |
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1 |
40 |
40 |
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2 |
45 |
90 |
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7 |
50 |
350 |
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30 |
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7 |
50 |
350 |
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1 |
45 |
45 |
1 |
40 |
40 |
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1 |
45 |
45 |
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30 |
13 |
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$620 |
12 |
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$575 |
2 |
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$85 |
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Journal |
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Date |
Transaction |
Debit |
Credit |
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