Fill in the blank to determine how much markup is included in ending inventory a

Question

Fill in the blank to determine how much markup is included in ending inventory and cost of goods sold that must be adjusted to reflect the correct net income of branch and home office:

Account

Billed price

Home office Cost

Markup 20% on cost

Beginning inventory

$10,000

Shipments to branch

$100,000

Available

Less ending inventory

$5,000

Cost of Goods Sold

Account

Billed price

Home office Cost

Markup 20% on cost

Beginning inventory

$10,000

Shipments to branch

$100,000

Available

Less ending inventory

$5,000

Cost of Goods Sold

Explanation / Answer

Answer)

Caluculation of closing inventory :

Inventory (Mark up value )= $ 5000

mark up value is 20% on cost then 20/120 on sales

then Mark up value in inventory= 5000*20/120= 833.33

then Closing inventory ( cost Value) = 5000-833.33= $ 4166.67

Note: we dont know the relation bet ween billed price and home ofice cost then we can assume that the both are in cost value only.

Cost Of Goods Glod = Opening Inventory + Purchases - Closing Inventory ( all are in cost values)

= 10000+ 100000-4166.67

= $ 95,833.33

Cost Of Gods Sold = $ 95,833.33

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