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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Applying the Cost of Goods Sold Model

Milton Company reported inventory of $60,000 at the beginning of 2014. During the year, it purchased inventory of $625,000 and sold inventory for $950,000. A count of inventory at the end of the year determined that the cost of inventory on hand was $50,000.

Required:

1. What was Milton’s cost of goods sold for 2014?

2. What is Milton’s gross margin for the year?

To determine

Concept introduction:

Cost of Goods Available for sale = Beginning inventory + Cost of Goods manufactured

Cost of Goods sold:

The Cost of goods sold is the difference of Cost of goods Available for sale and the Ending finished goods inventory. The formula to calculate the Cost of goods sold is as follows:

Cost of Goods sold = Cost of goods available for sale − Ending finished goods inventory

Or

Cost of Goods sold = Beginning inventory + Purchased − Ending inventory

Requirement 1:

To calculate:

The Cost of Goods sold for the year 2014.

Explanation

The Cost of Goods sold for the year 2014 is calculated as follows:

Cost of Goods sold = Begi...

To determine

Concept introduction:

Cost of Goods Available for sale = Beginning inventory + Cost of Goods manufactured

Cost of Goods sold:

The Cost of goods sold is the difference of Cost of goods Available for sale and the Ending finished goods inventory. The formula to calculate the Cost of goods sold is as follows:

Cost of Goods sold = Cost of goods available for sale − Ending finished goods inventory

Or

Cost of Goods sold = Beginning inventory + Purchased − Ending inventory

Requirement 2:

To calculate:

The Gross Margin for the year 2014.

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