Beginning inventory, purchases, and sales data for prepaid cell phones for December are as follows:

Date	Units and Cost
Dec. 1	3,800 units at $20

Date	Units and Cost
Dec. 10	1,900 units at $22
20	1,710 units at $24

Date	Units
Dec. 12	2,660 units
14	2,280 units
31	1,140 units

Question Content Area

a. Assuming that the perpetual inventory system is used, costing by the LIFO 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.

Date	Quantity Purchased	Purchases Unit Cost	Purchases Total Cost	Quantity Sold	Cost of Goods Sold Unit Cost	Cost of Goods Sold Total Cost	Inventory Quantity	Inventory Unit Cost	Inventory Total Cost
Dec. 1							3800	20	67000
Dec. 10	1900	22	41800				3800	20	67000
							1900	22	41800
Dec. 12				1900	22	41800	?	20	Dec. 12
				?	20	?
Dec. 14					20	45600	?	20	?
Dec. 20	1710	24	41040				?	20	?
							1710	24	41040
Dec. 31				1140	24	27360	?	20	?
							?	?	?
Dec. 31	Balances					?			?

 

a. Note that this exercise uses the perpetual inventory system. When the perpetual inventory system is used, revenue is recorded each time a sale is made along with an entry to record the cost of the goods sold. LIFO means the last units purchased are assumed to be the first to be sold. Therefore after each sale, the remaining or ending inventory is made up of the first purchases. Think of your inventory in terms of "layers." In other words, your Dec. 1 inventory plus your Dec. 10 purchase make up your goods available for the Dec. 12 sale. Under perpetual LIFO, you sell the Dec. 10 goods first. If there are not enough, then you go to the Dec. 1 layer. At that point, you sell again on Dec. 14, but all you have left is your Dec. 1 goods. Next you purchase more goods on Dec. 20 and now have 2 layers of inventory. Is there enough of the newest Dec. 20 purchase to satisfy the Dec. 31 purchase? If so, the remainder from the Dec. 1 layer along with the remainder from the Dec. 20 layer make up the ending inventory. By multiplying the units sold from each "layer" by their corresponding unit cost and adding the amounts together, you can determine the total cost of the units sold. Double-check your figure by taking the ending inventory amount away from the total inventory available for sale.