Perpetual LIFO Inventory Method Example, Concepts, Illustrations, Sample Help Online

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Understanding Perpetual LIFO Inventory Method Example

Under this method it is assumed that the last costs incurred to purchase inventory are first costs charged against revenues.

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Perpetual LIFO Inventory Method Example Explanation

Example: the following is the information of a company showing perpetual LIFO inventory valuation
Date units purchased units sold cost per unit inventory units

June 1 beginning inventory 700 $10 700
June 3 purchase 100 $12 800
June 8 sale 500 300
June 15 purchase 600 $14 900
June 19 purchase 200 $15 1,100
June 25 sale 400 700
June 27 sale 100 600
June 30 ending inventory

500 units sold
= 100 units from June 3 purchases at $12 per unit
= 400 units from beginning inventory at $10 per unit

Cost of goods sold = 100x$12 + 400x$10
= $1,200 + $4,000 = $5,200

(*2) 400 units sold
= 200 units from June 19 purchases at $15 per unit
+ 200 units from June 15 purchases at $14 per unit

Cost of goods sold = 200x$15 + 200x$14
= $3,000 + $2,800 = $5,800

(*3) 100 units sold
= 100 units from June 15 purchases at $14 per unit

Cost of goods sold = 100x$14 = $1,400

Total cost of goods sold
= 100x$12 + 400x$10 + 200x$15 + 200x$14 + 100x$14
= $1,200 + $4,000 + $3,000 + $2,800 + $1,400
= $5,200 + $5,800 + $1,400 = $12,400

Cost of ending inventory
= Beginning inventory + Cost of purchases – Cost of goods sold
= $7,000 + (100x$12 + 600x$14 + 200x$15) – $12,400
= $7,000 + $12,600 – $12,400 = $7,200

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