[rafiv900]

I have problems understanding the solution. Can anyone please explain how you get to those numbers in the solution, Thank You.

A- Nest Co. recorded the following inventory info. during month January:

Balance on 1/1 2,000 units 1 unit cost 2,000 total cost 2,000 Unit cost on Hand

Purchased on 1/8 1,200 units 3 unit cost 3,600 total cost 3,200 Unit cost on Hand

Sold on 1/23 1,800 units – unit cost – total cost 1,400 Unit cost on Hand

Purchased on 1/28 800 units 5 unit cost 4,000 total cost 2,200 Unit cost on Hand

Nest uses The LIFO method to cost inventory. What amount should Nest report as inventory on Jan 31 under each of the following methods of recording inventory?

Solution:

LIFO Perpetual:

1,400 units @1.00 = 1,400

800 units @ 5 = 4,000

Total $5,400

LIFO Periodic:

2,000 units @1 = 2,000

200 units @ 3 = 600

Total 2,600

Journey Started - June 2015
FAR - TBD
AUD - January 20, 2016
BEC - TBD
REG - TBD

[Anonymous]

Perpetual:

– Start w/ 2000 units @ 1 cost per unit = 2000 total cost. Balance is same.

– Buy 1200 units @ 3 cost per unit = 3600 total cost. Inventory balance: 2000 @ 1 and 1200 @ 3.

– Sold 1800 units. First step: sell the last layer of 1200 units @ 3. Still need to give customer another 600 units. Take this from the layer before, which was 2,000 @ 1. Now it is 1400 @ 1.

– Buy 800 units @ 5 cost per unit = 4000 total cost. Balance is now 1400 @ 1 (from last step) and 800 @ 5.

Periodic:

– Figure out how many units in ending inventory: 2000 + 1200 – 1800 + 800 = 2200.

– Figure out how many units this is above starting inventory of 2000: 2200 – 2000 = 200 above starting.

– Starting inventory is 2000 @ 1, and we have 200 more than that. What was our first purchase? It was 1200 units @ 3. Our 200 units must have come from there, so it's 200 @ 3.

Hope that made sense.

[rafiv900]

Thank You for your response, now I understand !!!

Journey Started - June 2015
FAR - TBD
AUD - January 20, 2016
BEC - TBD
REG - TBD

[Author]

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