What is the company's ending inventory and cost of goods sold for the year ended December 31, 2018, using the periodic last-in, first-out (LIFO) method?
Ending inventory = $61,000, and cost of goods sold = $231,500.
Using the periodic last-in, first-out (LIFO) method, the most recent inventory costs are assigned to the cost of goods sold first, which results in a lower ending inventory value and higher cost of goods sold for the period.
This choice suggests an ending inventory that is too high for the LIFO method, as it does not account for the latest inventory costs being attributed to the cost of goods sold. The resulting cost of goods sold is also understated, failing to reflect the appropriate allocation of costs.
Similar to choice A, this option indicates an ending inventory that is not consistent with LIFO calculations. The cost of goods sold is also incorrectly calculated, as it should reflect the higher recent costs of inventory that have been sold during the period.
This option presents an even higher ending inventory, which contradicts the LIFO approach that prioritizes the latest costs for sold goods. Consequently, the cost of goods sold is too low, failing to represent the accurate expense incurred from the most recent inventory purchases.
This choice accurately reflects the LIFO method where the most recent costs are assigned to goods sold, resulting in a lower ending inventory value. It aligns with the principles of LIFO accounting, producing a higher cost of goods sold figure consistent with recent purchases.
The LIFO method significantly impacts the valuation of ending inventory and cost of goods sold. In this case, the correct answer indicates that the company has an ending inventory of $61,000 and a cost of goods sold of $231,500. This approach results in a logical reflection of the most recent cost structures, highlighting how these accounting methods affect financial reporting.
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