Lifo under periodic inventory procedure, Accounting Basics

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Q. LIFO under periodic inventory procedure?

The LIFO (last-in, firstout) method of inventory costing presume that the costs of the most recent purchases are the first costs charged to cost of goods sold when the company actually sells the goods. In Exhibit 53 we illustrate the use of LIFO under periodic inventory procedure. Ever since the company charges the latest costs to cost of goods sold under periodic inventory procedure the ending inventory always consists of the oldest costs. Consequently when determining the cost of inventory under periodic inventory procedure the company lists the oldest units as well as their costs. The first units catalogued are those in beginning inventory then the first purchase and so on until the number listed agrees with the units in ending inventory. Therefore ending inventory in Exhibit consists of the 10 units from beginning inventory and the 10 units purchased on March 2. The overall cost of these 20 units USD 165 is the ending inventory cost the cost of goods sold is USD 525.

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