Causwell Company began 2021 with 10,000 units of inventory on hand. The cost of each unit was $5.00. During 2021 an additional 30,000 units were purchased at a single unit cost, and 20,000 units remained on hand at the end of 2021 (20,000 units therefore were sold during 2021). Causwell uses a periodic inventory system. Cost of goods sold for 2021, applying the average cost method, is $115,000. The company is interested in determining what cost of goods sold would have been if the FIFO or LIFO methods were used. 2. Determine the cost of goods sold for 2021 using the LIFO method.

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A:

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A: 1a.

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A:

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A: 1.

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A: Following is the answer to the given question

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A: LIFO stands for Last In First Out which means units purchased in last would be sold first.

Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.