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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Applying the Cost of Goods Sold Model The following amounts were obtained from Stanwick Company’s accounting records.

Chapter 7, Problem 1P, Applying the Cost of Goods Sold Model The following amounts were obtained from Stanwick Companys

Required:

Next Level Compute the missing amounts.

To determine

Identify the missing amounts.

Explanation

Periodic inventory system:

The method or system of recording the transactions related to inventory occasionally or periodically is referred as periodic inventory system.

Perpetual inventory system:

The method or system of maintaining, recording, and adjusting the inventory perpetually throughout the year, is referred to as perpetual inventory system.

The inventory system, best represented by the given statements are as follows:

Particulars20192020
Amount ($)Amount ($)Amount ($)Amount ($)
Net sales $381,220  $423,150
Cost of goods sold    
Beginning balance$ 36,800  (d) $ 41,870  
Add: Net Purchases(a)$ 273,840  $ 296,700  
Total available for sale(b)$ 310,640  (e) $338,570  
Ending inventory$ 41,870  (f) $ 43,370  
Cost of goods sold (c) $ 268,770  $295,200
Gross Margin $112,450 (g) $127,950

Table (1)

Working note (c):

Compute the cost of goods sold.

Cost of goods sold 2019 = Net sales  Gross margin=$381,220$112,450=$268,770

Working note (b):

Compute the total available for sale 2019.

Total available for sale 2019 = Cost of goods sold + Ending inventory=$268,770+$41,870=$310,640

Working note (a):

Compute the purchases

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