In its first month of operations Sheridan Company made three

In its first month of operations, Sheridan Company made three purchases of merchandise in the following sequence: (1) 240 units at $3, (2) 340 units at $5, and (3) 440 units at s6. Assumi 140 units on hand at the end of the period, compute the cost of the ending inventory under (a) the FIFO method and (b) the LiFO method. Sheridan Company uses a periodic inventory system. The Ending Inventory FLFO LIFO

Solution

purchases No. units cost per total cost unit 1 240 3 720 2 340 5 1700 3 440 6 2640 cost of ending inventory 1) FIFO 140 6 840 (first in first out so ending inventory will consist of units purchased last) 2) LIFO 140 3 420 (last in first out so ending inventory will consist of units purchased first) The Ending inventory FIFO 840 LIFO 420