Poole Company purchased two identical inventory items.One of the items,purchased in January,cost $4.50.The other,purchased in February,cost $4.75.One of the items was sold in March at a selling price of $7.50.Poole uses LIFO.Which of the following statements is true?
A)The balance in ending inventory would be $4.75.
B)The amount of gross margin would be $2.75.
C)The amount of ending inventory would be $4.625.
D)The amount of cost of goods sold would be $4.50.

Question

Quizplus · Accepted Answer

The last-in,first-out (LIFO)cost flow method requires that the cost of the items purchased last be charged to cost of goods sold.
Ending inventory = $4.50 (earliest purchase)
Gross margin = Sales - Cost of goods sold
Gross margin = $7.50 - $4.75 = $2.75

Poole Company Purchased Two Identical Inventory Items