Consider the following information for a particular company. Determine the amount of Purchases. ...
Question:
Consider the following information for a particular company. Determine the amount of Purchases.
| Beginning inventory | $35,400 |
| Ending inventory | $22,000 |
| Purchases | ? |
| Cost of goods sold | $654,700 |
Purchases:
In order for a purchase to be successful, a predetermined amount of money must be paid in order to take possession of a specific asset, property, item, or right. Purchases can be made in cash or on credit, depending on the needs of the business. Purchases can also increase the value of inventory. Purchases are recorded on the company's income statement.
Answer and Explanation: 1
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We will use the following formula to calculate the purchases as below:
Purchases = Cost of goods sold + Ending inventory - Beginning inventory
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Accounting for Inventory Purchases
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Chapter 6 / Lesson 4
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Accounting of inventory purchases, or merchandise that is stored to be sold directly to customers, involves calculating far more than simple stock and unit costs. Learn how the original price, discounts, returns/allowances, transportation, and ownership/transfer fees are all factored into accounting for inventory purposes.
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