Tip:
Highlight text to annotate it
X
Female Narrator: Now, we're going to go back,
and now, we're going to do LIFO.
Now, LIFO means last in, first out.
Last in, first out, and we're still doing a perpetual problem.
So we need to keep these in the order that they happened,
because we always need to know what our inventory is.
So on the 3rd,
we purchased 10 units at 5 for a total of $50,
and now, we have a balance of 10 at 5 for a total of 50.
At this point, we only have one inventory layer,
so it's very simple.
So on the 5th, when I sell my 8 units,
I look at my balance, and I only have one layer.
So I must've sold them at 5 for a total of 40.
So 2 times 5 equals 10, 'cause that's what I have left.
This should look very familiar from when we did FIFO,
because we only have that one layer.
Now, on the 10th, I sold...
purchased 12 leashes at $6-- or a total of $72.
So now, let's talk about this.
It is critical that we keep these in the proper order,
so we know which one we purchased first.
Okay?
So we have ending inventory of 82.
This is where your answer will start to be different than FIFO.
Because under LIFO,
we assume we take from our last item purchased,
so we're actually going to take from that layer.
So we sold 6 leashes at $6-- is our cost.
Okay?
This isn't nothing to do with sales price.
That gives me $36.
Two times 5 and 6 times 6, the total of these is $46.
Okay?
Notice that I'm keeping the layers in order.
And I'm restating them,
so I know exactly what I have at which cost.
On the 22nd, I purchase another 15 units at 7--
or a total of 105.
So now, I have 2 at 5, 6 at 6, and 15 at 7.
So I have a total of $151,
and I have three inventory layers.
You'll notice with LIFO, you get more inventory layers,
because you're always dipping from the newest one
before you exhaust the old one.
Now on the 28th, I sell 9 units.
I have to take the 9 units from here,
so I have 9 at 7-- or a total of 63.
That gives me 2 at 5,
'cause I didn't take any of those; 6 at 6;
and now, I have 6 left at this layer.
I add all of this together, and I get $88.
So what I'm left with is $88 in my ending inventory,
and I have a cost of 139.
Prices are rising.
Okay?
So as prices go up, what happens?
Well, FIFO, we had 129, because under LIFO,
we're capturing our current cost in our cost of goods sold.
We're capturing the current cost in the cost of goods sold,
but our balance sheet is reflecting all the old cost.
Okay, well, if you have any questions,
ask 'em via the discussion board
and watch for the next video.