Swifty Corporation uses a periodic inventory system. Details for the inventory account for the month of January 2022 are as follows: Units Per unit price Total Balance, 1/1/2022 230$4.00$920 Purchase, 1/15/2022 110..4.00440 Purchase, 1/28/2022 110..4.20462 An end of the month (1/31/2022) inventory showed that 180 units were on hand. If the company uses LIFO, what is the value of the ending inventory

The value of the ending inventory is $720.

Explanation:

Note: The data in the question are merged together. They are therefore sorted before answering the question as follows:

                                  Units        Per unit price        Total

Balance, 1/1/2022        230             $4.00               $920

Purchase, 1/15/2022     110                4.00                440

Purchase, 1/28/2022    110                4.20                462

The  explanation of the question is now given as follows:

Last In, First Out (LIFO) refers to an inventory method in which the last item of inventory to arrive the store are sold first before the inventory that arrived earlier.

Periodic LIFO implies that the latest costs inventory are removed from inventory at the end of each period.

The value of the ending inventory can be calculated as follows:

Total units available for sales = 230 + 110 + 110 = 450

Total units sold = 450 - 180 = 270

Since total units sold is 270 and the company uses periodic LIFO, this implies that all the 110 units purchased on 1/28/2022 are sold first followed by all the 110 units purchased on 1/15/2022. The addition gives 220 units. The remaining 50 units are sold from the balance on 1/1/2022.

The implication of the above is that 180 units ending inventory is part of the balance on 1/1/2022. Therefore, the 180 units ending inventory will be valued at $4.00 price per unit of the balance on 1/1/2022 as follows:

Value of the ending inventory = 180 * $4.00 = $720

Therefore, the value of the ending inventory is $720.

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