How do you record the LIFO adjustment?

nyc2014 · October 31, 2011, 1:29am

So I tried:

Beginning Inventory: 70 units, $35/unit
Oct 4 Purchase: 120 units, $64/unit
Oct 15 Sell: 140 units, $11,900
Oct 20 Purchase: 130 units, $74/unit
Oct 22 Sell: 80 units, $6800

For FIFO:

Oct 15 Sell: (7035) + (7064) = 6930
Oct 22 Sell: (5064) + (3074) = 5420

6930 + 5420 = $12350

For LIFO:

Oct 15 Sell: (13074) + (1064) = 10260
Oct 22 Sell: (80*64) = 5120

10260 + 5120 = 15380

15380 - 12350 = 3030 LIFO Adjustment needed.

But this is the wrong answer. What am I doing wrong? Thanks.

ryhend88 · October 31, 2011, 3:10am

Well for your LIFO adjustment, I see that you are accounting for a sale of 130 units on Oct 15 at the price of $74. You cannot sell the $74 units on October 15th because those units were not purchased until October 22nd.

You calculation should look like this:

Oct 15 Sell: (12064) + (2035) = 8380
Oct 22 Sell: (80*74) = 5920

8380+ 5920 = 14300

Your FIFO calculation looks correct so try 15380 - 14300 = 1080 Adjustment

Remember that in FIFO, you are selling items that you have most recently bought.

nyc2014 · October 31, 2011, 3:29am

Unfortunately, 1080 is not correct. Kinda frustrating… this question doesn’t seem to be so hard, but I can’t get it right… lol

spydersix · October 31, 2011, 12:52pm

I got the same answer but then I looked at the actual problem. It says they purchased 120 units @ 60 and returned 20 units received credit.

Try 60 instead of 64.

nyc2014 · October 31, 2011, 1:26pm

I tried 60, but it didn’t work either. I think the extra $4 is for the $5 per unit for freight - $1 per unit for the purchase discount = $64 per unit.

How do you record the LIFO adjustment?

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