Belle Co. has beginning inventory of 12 sets of paints at a cost of $1.50 each. During the year, the store purchased 7 at $3.00, 8 at $3.25, and 12 at $3.50. By the end of the year, 31 sets were sold. Using the LIFO method, the cost of ending inventory is

Question

A. $3.50.
B. $28.00.
C. $12.00.
D. $21.00.

Answer 1

Answer is C. $12.00.

Explanation: The LIFO method of inventory stands for Last In, First Out. This means that the value of the most recent inventory purchased is used to value the products sold.In this case there was a beginning inventory of 12 units at a cost of $1.50 each. Throughout the year there were 27 additional paint sets purchased and 31 sets sold. Using the LIFO method, the 31 sets sold were the 27 that were purchased throughout the year, plus 4 from beginning inventory. This only leaves 8 of the beginning inventory left as ending inventory. The value of each of these is $1.50, so the total is 8 units x $1.50 = $12.00 value of ending inventory.