Western company begins the year with $50,000 of inventory on hand. During 2018, western purchases additional inventory for $100,000 cash. Sales for the year, all on account, totaled $70,000. A physical count determined the cost of inventory at the end of the year to be $110,000. Assuming western uses a periodic inventory system, the journal entry at the end of the year once the physical count occurs includes which of the following:

Credit purchases $100,000

Debit cost of goods sold $40,000

Debit inventory (ending) $110,000

Credit inventory (beginning) $50,000

Question

Adam Reeves

Business

20 August, 19:25

Western company begins the year with $50,000 of inventory on hand. During 2018, western purchases additional inventory for $100,000 cash. Sales for the year, all on account, totaled $70,000. A physical count determined the cost of inventory at the end of the year to be $110,000. Assuming western uses a periodic inventory system, the journal entry at the end of the year once the physical count occurs includes which of the following:

Credit purchases $100,000

Debit cost of goods sold $40,000

Debit inventory (ending) $110,000

Credit inventory (beginning) $50,000

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Answers (1)

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Apple Jack · Answer 1

Debit cost of goods sold $40,000

Explanation:

As with the details of inventory we have:

Opening value of inventory = $50,000

Purchases = $100,000

Thus, total inventory = $150,000

On the closing date we have the balance of inventory in hand = $110,000

Therefore, cost of goods sold = Total inventory - Closing

= $150,000 - $110,000 = $40,000

Cost of goods sold is an expense, and shall be debited.