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Q. LIFO under perpetual inventory procedure?
LIFO under perpetual inventory procedure observes Exhibit to see the LIFO method using perpetual inventory procedure. In this procedure the inventory composition and balance are updated with each purchase and sale. Notice in Exhibit that every time a sale takes place the items sold are assumed to be the most recent ones acquired. Regardless of numerous purchases and sales during the year the ending inventory still includes the 10 units from beginning inventory in our instance. The remainder of the ending inventory consists of the last purchase for the reason that no sale occurred after the December 21 purchase.
Applying LIFO on a perpetual foundation during the accounting period as shown in Exhibit results in different ending inventory as well as cost of goods sold figures than applying LIFO only at year-end using periodic inventory procedure. Therefore if LIFO is applied on a perpetual basis during the period special adjustments are sometimes necessary at year-end to take full advantage of using LIFO for tax purposes. complex applications of LIFO perpetual inventory procedures that require such adjustments are beyond the scope of this text.
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