Question

Use the information below to answer the following question. Boxwood Company sells blankets for $60 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1. Date Blankets Units Cost May 3 Purchase 5 $20 10 Sale 3 17 Purchase 10 24 20 Sale 6 23 Sale 3 30 Purchase 10 30 Assuming that the company uses the perpetual inventory system, determine the cost of merchandise sold for the sale of May 20 using the LIFO inventory cost method. a. $120 b. $180 c. $136 d. $144

Answer 1

Answer:

D. $144

Explanation:

With this method the last merchandise entered is the first to come out of existence.

At the time of the sale of May 20, the situation was as follows.

5/3 Purchase 5 units $20

5/10 Sale       3 Units

5/17 Purchase 10  units  $24

5/20 Sale       6

The cost of selling these 6 units corresponds entirely to the cost of the purchase of May 17. It does not matter that there are still 2 unsold units of the previous purchase in the warehouse since we are using the LIFO method. So 6 units x $24 = $144