Use the following information to answer the following questions. The Boxwood Company sells blankets for $60 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1.
Assuming that the company uses the perpetual inventory system, determine the cost of merchandise sold for the sale of May 20 using the FIFO inventory cost method.
A) $120
B) $180
C) $136
D) $144

Question

Use the following information to answer the following questions. The Boxwood Company sells blankets for $60 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1.
 Assuming that the company uses the perpetual inventory system, determine the cost of merchandise sold for the sale of May 20 using the FIFO inventory cost method.
A) $120 
B) $180 
C) $136 
D) $144

Quizplus · Accepted Answer

According to the FIFO inventory cost method, the cost of the first units purchased is used to calculate the cost of merchandise sold, and the cost of the last units purchased is left in ending inventory.

The company sold 2 blankets on May 20, so the cost of merchandise sold would be the cost of the first 2 blankets purchased.

The company purchased 5 blankets on May 10 at a cost of $40 each, for a total cost of $200.

The cost of the first 2 blankets would be $40 each, for a total cost of $80.

Therefore, the cost of merchandise sold for the sale of May 20 using the FIFO inventory cost method is $80.

Choice C, $136, is incorrect because it is not supported by the information provided.

Use the Following Information to Answer the Following Questions