A company purchased 400 units for $30 each on January 31. It purchased 135 units for $40 each on February 28. It sold 200 units for $55 each from March 1 through December 31. If the company uses the last-in, first-out inventory costing method, what is the amount of Cost of Goods Sold on the income statement for the year ending December 31? (Assume that the company uses a perpetual inventory system.)

Question

Quizplus · Accepted Answer

Under the last-in, first-out (LIFO) method, the company sells the most recently purchased items first. Therefore, the cost of goods sold (COGS) for the 200 units consists of all 135 units purchased in February at $40 each and 65 units from the January purchase at $30 each. The calculation is (135 units * $40) + (65 units * $30) = $5,400 + $1,950 = $7,350.

A Company Purchased 400 Units for $30 Each on January