Ranns Supply uses a perpetual inventory system. On January 1, its inventory account had a...
Question:
Ranns Supply uses a perpetual inventory system. On January 1, its inventory account had a beginning balance of 6,450,000. Ranns engaged in the following transactions during the year:
| 1. | Purchased merchandise inventory for 9,500,000 |
| 2. | Generated net sales of 26,000,000 |
| 3. | Recorded inventory shrinkage of 10,000 after taking a physical inventory at year-end |
| 4. | Reported gross profit for the year of 15,000,000 in its income statement |
A. At what amount was Cost of Goods Sold reported in the company's year-end income statement?
B. At what amount was Merchandise Inventory reported in the company's year-end balance sheet?
C. Immediately prior to recording inventory shrinkage at the end of the year, what was the balance of the Cost of Goods Sold account? What was the balance of the Merchandise Inventory account?
Ending inventory and cost of goods sold
The ending inventory is deducted from the cost of goods available for sale (beginning inventory plus purchased merchandise for the period) to calculate the cost of goods sold for the period.
Answer and Explanation: 1
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A.) The Cost of Goods sold = Net Sales - Gross Profit
= $26,000,000 - $15,000,000
= $11,000,000
B.) The ending inventory will be:
| Beginning... |
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What Is Inventory? - Definition & Example
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