Alphabet Company buys different letters for resale.It buys A thru J on January 1 at $4 per letter,and sells C on January 15.On February 1,it buys K and L at $6 per letter and sells A and K on February 9.It then buys M thru O on March 1 at $7 per letter and sells F,L,M,N,and O on March 19.If the company uses the LIFO method on a perpetual basis,what is the cost of goods sold for the three months ended March 31 (rounded to the nearest dollar)?
A)$32
B)$41
C)$45
D)$56

Question

Quizplus · Accepted Answer

The cost of goods sold for the three months ended March 31 is $45. This is calculated as follows:- January 1: Alphabet Company buys A thru J at $4 per letter. The cost of these letters is $40.- January 15: Alphabet Company sells C. The cost of C is $4.- February 1: Alphabet Company buys K and L at $6 per letter. The cost of these letters is $12.- February 9: Alphabet Company sells A and K. The cost of A is $4, and the cost of K is $6. The total cost of the letters sold is $10.- March 1: Alphabet Company buys M thru O at $7 per letter. The cost of these letters is $21.- March 19: Alphabet Company sells F, L, M, N, and O. The cost of these letters is $35.The total cost of goods sold for the three months ended March 31 is $40 + $4 + $12 + $10 + $21 + $35 = $122. However, since Alphabet Company is using the LIFO method, the cost of goods sold is calculated as the cost of the most recent purchases first. Therefore, the cost of goods sold for the three months ended March 31 is $21 + $35 = $45.

Alphabet Company Buys Different Letters for Resale