Rectangle Ltd manufactures cardboard boxes for a variety of purposes.The following information relates to the production of the extra large packing boxes used by removalists for the period ended 30 June 2012.
$$\begin{array} { | l | l | r | }
\hline \text { Date } & \text { Manufactured } & \text { Units sold } \
\hline 1 \text { July (balance) } & 100 @ \$ 3.05 & \
\hline 15 \text { July 2011 } & 300 @ \$ 3.00 & \
\hline 19 \text { July 2011 } & & 250 \
\hline 20 \text { August 2011 } & 200 @ \$ 2.50 & \
\hline 21 \text { August 2011 } & & 190 \
\hline 15 \text { October } 2011 & 170 @ \$ 3.12 & \
\hline 30 \text { October 2011 } & & 200 \
\hline 15 \text { December 2011 } & 320 @ \$ 3.40 & \
\hline 15 \text { January 2012 } & & 175 \
\hline 13 \text { March 2012 } & 90 @ \$ 2.90 & \
\hline 30 \text { March 202 } & & 220 \
\hline 15 \text { June 2012 } & 80 @ \$ 3.20 & \
\hline 28 \text { June 2012 } & & 100 \
\hline
\end{array}$$
The company uses a perpetual inventory system.The net realisable value per extra large cardboard box is $3.15 at the end of the period.What are the costs of goods sold and the value of ending inventory for Rectangle Ltd assuming the LIFO cost-flow assumption is used?
A) cost of sales: $3460.40; ending inventory: $380.00
B) cost of sales: $3453.90; ending inventory: $393.75
C) cost of sales: $3459.41; ending inventory: $380.99
D) cost of sales: $3453.90; ending inventory: $386.50

Question

Rectangle Ltd manufactures cardboard boxes for a variety of purposes.The following information relates to the production of the extra large packing boxes used by removalists for the period ended 30 June 2012. 
$$\begin{array} { | l | l | r | } 
\hline \text { Date } & \text { Manufactured } & \text { Units sold } \
\hline 1 \text { July (balance) } & 100 @ \$ 3.05 & \
\hline 15 \text { July 2011 } & 300 @ \$ 3.00 & \
\hline 19 \text { July 2011 } & & 250 \
\hline 20 \text { August 2011 } & 200 @ \$ 2.50 & \
\hline 21 \text { August 2011 } & & 190 \
\hline 15 \text { October } 2011 & 170 @ \$ 3.12 & \
\hline 30 \text { October 2011 } & & 200 \
\hline 15 \text { December 2011 } & 320 @ \$ 3.40 & \
\hline 15 \text { January 2012 } & & 175 \
\hline 13 \text { March 2012 } & 90 @ \$ 2.90 & \
\hline 30 \text { March 202 } & & 220 \
\hline 15 \text { June 2012 } & 80 @ \$ 3.20 & \
\hline 28 \text { June 2012 } & & 100 \
\hline
\end{array}$$
The company uses a perpetual inventory system.The net realisable value per extra large cardboard box is $3.15 at the end of the period.What are the costs of goods sold and the value of ending inventory for Rectangle Ltd assuming the LIFO cost-flow assumption is used?
A) cost of sales: $3460.40; ending inventory: $380.00
B) cost of sales: $3453.90; ending inventory: $393.75
C) cost of sales: $3459.41; ending inventory: $380.99
D) cost of sales: $3453.90; ending inventory: $386.50

Quizplus · Accepted Answer

LIFO (Last-In, First-Out) assumes that the most recently purchased items are the first to be sold. Therefore, the cost of goods sold will be calculated using the costs of the most recent purchases.The ending inventory will consist of the oldest purchases, which are the 100 units purchased on 1 July 2011 at a cost of $3.05 per unit.Therefore, the cost of goods sold is:(300 x $3.00) + (200 x $2.50) + (320 x $3.40) + (90 x $2.90) + (80 x $3.20) = $3460.40And the value of ending inventory is:100 x $3.05 = $380.00

Rectangle Ltd Manufactures Cardboard Boxes for a Variety of Purposes