Perpetual inventory using LIFO

Beginning inventory, purchases, and sales for Item 88-HX are as follows:

Date	Line Item Description	Value
July 1	Inventory	94 units @ $30
July 8	Sale	75 units
July 15	Purchase	104 units @ $33
July 27	Sale	87 units
Assuming a perpetual inventory system and using the last-in, first-out (LIFO) method, determine (a) the cost of goods sold on July 27 and (b) the inventory on July 31.

a. Cost of goods sold on July 27 fill in the blank 1 of 2

b. Inventory on July 31 fill in the blank 2 of 2


To solve this problem using the perpetual inventory system and LIFO (Last-In, First-Out) method, we need to follow each transaction and update inventory accordingly.

### Step-by-Step Calculation:

#### **Beginning Inventory:**
- July 1: 94 units @ $30 each = $2,820 total

#### **Transactions:**

1. **July 8 (Sale of 75 units):**
   - Since we are using LIFO, we sell the most recently acquired inventory first.
   - All 75 units will come from the beginning inventory (94 units @ $30).
   - Cost of goods sold (COGS) = 75 units × $30 = $2,250
   - Remaining inventory = 94 units - 75 units = 19 units @ $30 each = $570

2. **July 15 (Purchase of 104 units @ $33 each):**
   - New inventory is added.
   - Total value = 104 units × $33 = $3,432
   - Updated inventory:
     - 19 units @ $30 each = $570
     - 104 units @ $33 each = $3,432

3. **July 27 (Sale of 87 units):**
   - Again, using LIFO, we sell the most recently acquired inventory first.
   - We have 104 units @ $33 in inventory. We will use these first.
   - Cost of goods sold:
     - 87 units × $33 = $2,871
   - Remaining inventory after sale:
     - (104 - 87) = 17 units @ $33 each = $561
     - 19 units @ $30 each = $570

4. **Inventory on July 31:**
   - 17 units @ $33 = $561
   - 19 units @ $30 = $570
   - Total inventory value = $561 + $570 = $1,131

### **Final Answers:**

(a) **Cost of goods sold on July 27:**  
COGS = $2,871

(b) **Inventory on July 31:**  
Inventory = $1,131

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Would you like further clarification on any of the steps? Here are some related questions to consider:

1. How does the LIFO method differ from the FIFO method in terms of financial impact?
2. What is the impact of using LIFO during times of inflation on net income?
3. Can you explain the perpetual inventory system versus the periodic system?
4. How would the cost of goods sold differ if the FIFO method was used instead?
5. What are the tax implications of using LIFO versus FIFO?

**Tip:** Understanding the choice of inventory method is crucial for financial reporting, as it can significantly impact a company’s reported profitability and tax liabilities.

Perpetual inventory using LIFO

Beginning inventory, purchases, and sales for Item 88-HX are as follows:

Date    Line Item Description    Value
July 1  Inventory   94 units @ $30
July 8  Sale        75 units
July 15 Purchase    104 units @ $33
July 27 Sale        87 units

Assuming a perpetual inventory system and using the last-in, first-out (LIFO) method, determine (a) the cost of goods sold on July 27 and (b) the inventory on July 31.

Learn how to calculate the cost of goods sold and inventory value for Item 88-HX using a perpetual inventory system and the LIFO method. Follow step-by-step calculations for the sales on July 8 and July 27, with inventory updates after each transaction.

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