Question Content AreaBoxwood Company sells blankets for $35 each. The following information was taken from the inventory records during May. The company had no beginning inventory on May 1. Boxwood uses a perpetual inventory system.DateBlanketsUnitsCostMay 3 Purchase8$1710 Sale4 17 Purchase11$1720 Sale5 23 Sale3 30 Purchase12$23Determine the cost of goods sold for the sale of May 20 using the LIFO inventory costing method.a. $51b. $68c. $276d. $85

The objective of the question is to calculate the cost of goods sold (COGS) for the sale on May 20 using the Last-In, First-Out (LIFO) inventory costing method. In LIFO, the most recently acquired items are sold first.First, let's understand the inventory movement till May 20. On May 3, 8 blankets were purchased at $17 each. On May 10, 4 blankets were sold. This leaves us with 4 blankets from the May 3 purchase. On May 17, 11 more blankets were purchased at $17 each. So, before the sale on May 20, the inventory consists of 4 blankets from the May 3 purchase and 11 blankets from the May 17 purchase, a total of 15 blankets.On May 20, 5 blankets were sold. According to LIFO, we start with the blankets purchased most recently. So, we first consider the 11 blankets purchased on May 17. Since the number of blankets sold (5) is less than the number of blankets purchased on May 17 (11), all the 5 blankets sold on May 20 are from the May 17 purchase.The cost of each blanket purchased on May 17 is $17. Therefore, the cost of goods sold for the 5 blankets sold on May 20 is 5 blankets * $17/blanket = $85.Using the LIFO inventory costing method, the cost of goods sold for the sale on May 20 is $85. This is calculated by considering the 5 blankets sold on May 20 to be from the most recent purchase on May 17, each costing $17.

Answered: Question Content Area Boxwood Company…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Boxwood Company sells blankets for $35 each. The following information was taken from the inventory records during May. The company had no beginning inventory on May 1. Boxwood uses a perpetual inventory system.

Date Blankets Units Cost

May 3     Purchase 8
$17

10     Sale 4

17     Purchase 11 $17

20     Sale 5

23     Sale 3

30     Purchase 12 $23

Determine the cost of goods sold for the sale of May 20 using the LIFO inventory costing method.

a. $51

b. $68

c. $276

d. $85