Salmone Company reported the following purchases and sales for its only product.Salmone uses a perpetual inventory system.Determine the cost assigned to cost of goods sold using LIFO.
A)$2,260
B)$3,180
C)$1,860
D)$3,580
E)$2,100

Question

Salmone Company reported the following purchases and sales for its only product.Salmone uses a perpetual inventory system.Determine the cost assigned to cost of goods sold using LIFO. 
A)$2,260 
B)$3,180 
C)$1,860 
D)$3,580 
E)$2,100

Quizplus · Accepted Answer

To calculate the cost assigned to cost of goods sold using LIFO, we start with the most recent purchases and work backwards.

Date: May 1 
Purchase: 100 units @ $20 each 
Total cost: $2,000 
Inventory balance: 100 units

Date: May 15 
Purchase: 50 units @ $24 each 
Total cost: $1,200 
Inventory balance: 150 units

Date: May 30 
Purchase: 75 units @ $28 each 
Total cost: $2,100 
Inventory balance: 225 units

Date: June 10 
Sale: 150 units @ $35 each 
Total revenue: $5,250 
Cost of goods sold: (100 units x $28) + (50 units x $24) = $2,800

Using LIFO, we assume that the most recent purchases are sold first. Therefore, we start with the 75 units purchased on May 30 and work backwards. We use up all 75 units, then take 75 units from the May 15 purchase, and finally 50 units from the May 1 purchase. This gives us a total cost of goods sold of $2,800, which corresponds to answer choice D.

Salmone Company Reported the Following Purchases and Sales for Its