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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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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

The following amounts were obtained from the accounting records of Rabren Supply Company:

Chapter 6, Problem 65APSA, Applying the Cost of Goods Sold Model The following amounts were obtained from the accounting

Required:

Compute the missing amounts.

To determine

Concept introduction:

Cost of goods Available for sale:

The Cost of goods Available for sale is the sum of beginning finished goods inventory and the cost of goods manufactured. The formula to calculate the Cost of goods Available for sale is as follows:

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 + Purchases − Ending inventory

To calculate:

The missing amounts.

Explanation

The missing amounts are calculated as follows:

Year 2018 Year 2019
Net Sales (A) $ 359,620 $ 423,150
Cost of Goods Sold:
Beginning Inventory (B) $36,800 $42,780 (d)
Purchases (C) $ 249,150 (a) $ 301,600
(285950-36800)
Cost of Goods available for sale (D) = (B+C) $ 285,950 (b)

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