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A perpetual-system merchandiser has: 6/1 beginning 10 units at $4; 6/5 sell 1; 6/10 buy 10 at $5; 6/16 sell 12; 6/22 buy 10 at $6; 6/30 sell 6. Using LIFO, what is total cost of merchandise sold for June?
A$85
B$90
C$95
D$98
Answer & Solution
Correct answer: D. $98
1. 6/5 sale of 1 unit comes from the $4 layer: $1 \times \$4 = \$4$.
2. 6/16 sale of 12 units under LIFO: 10 newest units at $5 ($\$50$) plus 2 units at $4 ($\$8$) = $\$58$.
3. 6/30 sale of 6 units from the newest $6 layer: $6 \times \$6 = \$36$.
4. Total cost of sales = $\$4 + \$58 + \$36 = \$98$.
5. Rule out $\$85$: that is the FIFO result for the same data.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §4.1.1 "Perpetual Inventory System", p.117_
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