   Chapter 7, Problem 1P ### Intermediate Accounting: Reporting...

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

#### Solutions

Chapter
Section ### 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. 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:

 Particulars 2019 2020 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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