Esquire Inc. uses the LIFO method to value its inventory. Inventory at January 1, 2016, was $500,000 (20,000 units at $25 each). During 2016, 80,000 units were purchased, all at the same price of $30 per unit. 85,000 units were sold during 2016. Esquire uses a periodic inventory system. Calculate the December 31, 2016, ending inventory and cost of goods sold for 2016.

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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.