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Financial & Managerial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337119207

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BuyFindarrow_forward

Financial & Managerial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337119207
Chapter 5, Problem 5.39EX
Textbook Problem
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Cost of goods sold

Identify the errors in the following schedule of the cost of goods sold for the year ended May 31, 2018:

Chapter 5, Problem 5.39EX, Cost of goods sold Identify the errors in the following schedule of the cost of goods sold for the

To determine

Cost of goods sold indicates the costs involved for the inventory sold by the business in a specific period of time. Its mathematical representation is as below:

Cost of Goods Sold=Beginning Inventory+PurchasesEnding Inventory

To Identify: The errors in the schedule of cost of merchandise sold of the company.

Explanation of Solution

  • Merchandise inventory on May 31, 2018 should be deducted from cost of merchandise available for sale, and the schedule should start with the beginning merchandise inventory on June 30, 2017.
  • Purchase returns and allowances and purchase discount should be deducted from purchases rather added.
  • Freight-In should be added to purchases rather deducted.
  • Merchandise inventory on June 30, 2017 should be taken to start the schedule of cost of merchandise sold, and the merchandise inventory on May 31, 2018 should be deducted from cost of merchandise available for sale.
  • Increase in estimated returns inventory should be deducted from cost of merchandise sold before estimated returns rather added.

Prepare the correct schedule of cost of merchandise sold of the company.

Company
Cost of Merchandise Sold Section
For The Year Ended May 31, 2018
Particulars Amount($) Amount($)
Merchandise inve...

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Chapter 5 Solutions

Financial & Managerial Accounting
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