Beginning inventory, purchases and sales for Item ER27 are as follows:Jan 1 Inventory 94 units @ $15Jan 5 Sale 75 unitsJan 11 Purchase 104 units @ $17Jan 21 Sale 87 units

Required:Assuming a perpetual inventory system and using the last-in, first-out (LIFO) method, determine:a) the cost of merchandise sold on January 21. b) the inventory on January 31.

a. The cost of merchandise sold on January 21: $1,479

b. The inventory on January 31: $574

19 units, $15 per unit, total $285

17 units $17 per unit, total $289

Explanation:

The LIFO is a method used to account value for inventory. Under the method, the last item of inventory purchased is the first one sold.

1. Jan 1, Inventory 94 units, $15 per unit. Total $1,410

2. Jan 5 Sale 75 units

Cost of goods sold = 75 x $15 = $1,125

The inventory = $1,410 - $1,125 = $285 (19 units, $15 per unit)

3. Jan 11 Purchase 104 units @ $17 per unit

The inventory: $2,053

19 units, $15 per unit, total $285

104 units $17 per unit, total $1,768

4. Jan 21 Sale 87 units

Cost of goods sold = 87 x $17 = $1,479

The inventory: $574

19 units, $15 per unit, total $285

17 units $17 per unit, total $289

5. Jan 31

The inventory: $574

19 units, $15 per unit, total $285

17 units $17 per unit, total $289