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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Chapter 6, Problem 7MCQ, Refer to the information for Morgan Inc. above. If Morgan uses a perpetual inventory system, what is

Refer to the information for Morgan Inc. above. If Morgan uses a perpetual inventory system, what is the cost of goods sold under LIFO at April 30?

a. $37,500

b. $38,400

c. $63,600

d. $64,500

To determine

Concept introduction:

Perpetual Inventory System:

The perpetual inventory system records and updates the inventory after each and every transaction. The inventory balance is updated after each transaction and it is kept up to date at every time.

LIFO method:

LIFO Stands for Last in First Out. Under this method, the latest units purchased are assumed to be sold first and cost of goods sold is calculated accordingly. The ending inventory in the method includes the oldest units purchased.

To calculate:

The cost of goods sold using the Perpetual LIFO inventory costing method.

Explanation

The cost of goods sold using the Perpetual LIFO inventory costing method is calculated as follows:

Morgan Inc.
Perpetual Inventory Record-LIFO
Purchases Cost of Goods Sold Inventory Balance
Date Unit Rate Total Cost Unit Rate Total Cost Unit Rate Total Cost
Apr. 1 1200 $ 25 $ 30,000
Apr...

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