Inventory at the beginning of the year cost $14,400. During the year, the company purchased (on account) inventory costing $89,000. Inventory that had cost $85,000 was sold on account for $99,000. At the end of the year, inventory was counted and its cost was determined to be $18,400. a. Calculate the cost of goods sold. b. What was the dollar amount of Gross Profit?

Question

Addyson Elliott

Business

6 February, 06:37

Inventory at the beginning of the year cost $14,400. During the year, the company purchased (on account) inventory costing $89,000. Inventory that had cost $85,000 was sold on account for $99,000. At the end of the year, inventory was counted and its cost was determined to be $18,400. a. Calculate the cost of goods sold. b. What was the dollar amount of Gross Profit?

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Answers (1)

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Oswaldo Baird · Answer 1

a. $85,000

b. $13,000

Explanation:

The movement in the balance of inventory at the beginning and ending balance is as a result of purchases and sales. This may be expressed mathematically as

opening balance + purchases - cost of goods sold = ending inventory

Given that Inventory that had cost $85,000 was sold on account for $99,000. Hence, the cost of goods sold is $85,000.

Gross profit is the difference between the sales and cost of goods sold.

Gross profit = $99,000 - $85,000

= $13,000