In its first month of operations, Cheyenne Corp. made three purchases of merchandise in the following sequence: (1) 185 units at $5, (2) 570 units at $6, and (3) 130 units at $7. Assuming there are 260 units on hand, compute the cost of the ending inventory under the (a) FIFO method and (b) LIFO method. Cheyenne uses a periodic inventory system.
FIFO
(a) Cost of the ending inventory $.
LIFO
(b) Cost of the ending inventory $.

Instructions are below.

Explanation:

Giving the following information:

Purchases:

(1) 185 units at $5

(2) 570 units at $6

(3) 130 units at $7

Ending inventory in units= 260

To calculate the ending inventory under the FIFO (first-in, first-out) method, we need to use the cost if the last units incorporated into inventory:

Ending inventory cost= 130*7 + 130*6= $1,690

To calculate the ending inventory under the LIFO (last-in, first-out) method, we need to use the cost if the firsts units incorporated into inventory:

Ending inventory cost= 185*5 + 75*6= $1,375