# Last In First Out Inventory Accounting - Example

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Hey everyone. Welcome back this is the

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video to do the example for LIFO using

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the delta company example

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uh that we've been doing, so there's

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gonna again a lot of overlapping a lot

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of things that you've seen before,

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I'm gonna go ahead and begin the problem

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exactly the way I did in the last video

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which is start where we already know

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where we're at, it doesn't change from si

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to FIFO or LIFO or weighted average,

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so I went ahead and put that up there

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those things don't change. So let's get

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into what does change which is the

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calculation for cost of goods sold. So

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again we sold

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29 units, so we need to expense 29 units

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so that's the starting point and the way

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we're going to do it in this method

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is the LIFO method which is the last or

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the most recent purchase in

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is the first to go out. And so

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our most recent purchase from the sale

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of 1220

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is the october 10th purchase, so that's

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I'm going to pull all 22 of those

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because remember we have to hit 29.

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29 is how many we have to expense so I'm

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at 30 dollars multiply that out that's

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going to be 660,

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again I'm going to put a little slash

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22 because I don't have 22 anymore

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I have zero of those. Now uh I haven't

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hit

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29 yet though so I need to pull some

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more the next place I'm going to pull is

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the next one right above the october

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purchase which is the april purchase and

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I only need to pull seven of those to

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hit

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29 so 7 at 27 that's going to give me

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189,

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I'm gonna put a little slash through 16

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because I don't have 16 anymore I have

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only nine of those left.

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And now that I've hit 29 units expensed

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I can add those numbers together

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and that is going to give me a total of

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849M

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that's my new cogs using the LIFO method,

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so I'm going to go ahead and put that

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into my journal entry 849-849,

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so I've completed my journal entry. Now I

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can go into the last thing which is

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again what the question is asking for us

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to do which is compute the cost of goods

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sold we have that 849,

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compute the gross profit we know gross

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profit again for the third time this is

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sales revenue minus cogs,

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our sales revenue remains at one

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thousand four fifty our cogs in this

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example

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is eight forty nine, so that's going to

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give me a gross profit of 601

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and our ending inventory we're going to

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look and see what we still have so I

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still have

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eight excuse me nine at 27 that's going

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to multiply that it's going to give me

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243 and I also have my beginning

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inventory nine,

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so nine at 25 that's going to give me

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225,

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if I add that up that's going to give me

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a total of 468

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and that is my ending inventory. So that

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is how you do this problem

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using the LIFO method. So hopefully again

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this made sense, hopefully you enjoyed it

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and you all take care.