Mar 28, 2017 · LIFO and FIFO are cost-flow assumption methodologies that have nothing to do with the physical flow of a company’s inventory. Most companies sell the oldest units in inventory first to avoid spoilage or product obsolescence. Required: Assuming a last-in, first-out (LIFO) cost flow assumption is used, compute: the cost of inventory on December 31, 2016. the cost of goods sold for the year 2016. Solution: (1). Cost of ending inventory : Since the company is using LIFO periodic system, the 1,300 units in ending inventory would be costed using the earliest purchasing ...
Periodic LIFO. LIFO means last-in, first-out, and refers to the value that businesses assign to stock when the last items they put into inventory are the first ones sold. The products in the ending inventory are either leftover from the beginning inventory or those the company purchased earlier in the period. In other words, it is the reverse of what you did before, because under LIFO, the last (i.e., the newest) inventory you bought is considered to be sold first, while under FIFO, the oldest inventory/purchases you bought/had is considered sold first. AVERAGE COST . The compromise and most logical at times is the average cost computation.
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