Use the following information to answer the following questions. The 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.
Assuming that the company uses the perpetual inventory system, determine the cost of merchandise sold for the sale of May 20 using the FIFO inventory cost method.
A) $120
B) $180
C) $136
D) $144

Question

Use the following information to answer the following questions. The 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.
 Assuming that the company uses the perpetual inventory system, determine the cost of merchandise sold for the sale of May 20 using the FIFO inventory cost method.
A) $120 
B) $180 
C) $136 
D) $144

Quizplus · Accepted Answer

Using the FIFO (first-in, first-out) method, we will assume that the first blankets purchased will be the first sold. On May 20, there were 2 blankets sold. The first 2 blankets purchased were on May 10 and May 15 at a cost of $64 each. Therefore, the cost of merchandise sold for the sale of May 20 would be 2 x $64 = $128. However, since the company sells the blankets for $60 each, the total revenue for the sale of May 20 would be 2 x $60 = $120. Therefore, the cost of merchandise sold for the sale of May 20 using the FIFO inventory cost method would be $128 and the revenue would be $120, resulting in a loss of $8.

Use the Following Information to Answer the Following Questions