Starlight Company has inventory of 8 units at a cost of $200 each on October 1. On October 2, it purchased 20 units at $205 each. 11 units are sold on October 4. Using the perpetual LIFO inventory method, what is the value of inventory after the October 4 sale?
A) $3,461
B) $3,500
C) $3,445
D) $3,485
E) $3,472

C. $3,445

Explanation:

Using LIFO,

That is Last in first out,

Cost of goods sold on October 4

= 11 × 205

= $2255.

Therefore, at inventory

We are left with

9 units at 205 and 8 units at 200.

Thus, value of inventory after October 4 sales

= (9 × 205) + (8 × 200)

= 1845 + 1600

= $3,445

Value of inventory after October 4 sales is $3,445

c) The value of the closing inventory = $3,445

Explanation:

Under the last -in-first-out (LIFO) method, inventory are priced using the price of the newest/latest batch in stock until a new batch is received after which the price of the new batch is used and this is continued.

Inventory = opening inventory + purchase - unit sold

Inventory = 8 + 20 - 11 = 17.

So we adopt this principle as follows:

The 11 units sold using the LIFO principle would have issued from the October 2 purchases.

The value of the 17 units remaining is

(20 -11)× $205    = 1845     (9 units balance from the latest batch)

8 × $200   =  1,600

The value of the closing inventory = $3,445

answer; tech (a) is correct;