Question

Ultra Co. uses a periodic inventory system. The following are inventory transactions for the month of January: 1/1 Beginning inventory 20,000 units at $13 1/20 Purchase 30,000 units at $15 1/23 Purchase 40,000 units at $17 1/31 Sales at $20 per unit 50,000 units Ultra uses the LIFO method to determine the value of its inventory. What amount should Ultra report as cost of goods sold on its income statement for the month of January?

Answer 1

Answer:

$830,000

Explanation:

Ultra Co.'s inventory for January:

Date               Number of units   Unit balance      Unit cost     Total cost   

January 1             20,000                20,000               $13         $260,000       

January 20          30,000                50,000               $15         $710,000          

January 23          40,000                90,000               $17        $1,390,000      

January 31          (50,000)                                       ($16.60)    ($830,000)

Ending inventory                             40,000                              $560,000

Using the last-in, first-out (LIFO) method, the COGS = (40,000 units x $17 per unit) + (10,000 units x $15 per unit) = $680,000 + $150,000 = $830,000