. Kalamazoo Manufacturing (KM) started 2016 with $52,000 of merchandise on hand.
ID: 2486701 • Letter: #
Question
. Kalamazoo Manufacturing (KM) started 2016 with $52,000 of merchandise on hand. During 2016, $280,000 in merchandise was purchased on account with credit terms of 2/10, n/30. All discounts were taken. Purchases were all made f.o.b. shipping point. KM paid freight charges of $9,000. Merchandise with an invoice amount of $4,000 was returned for credit. Cost of goods sold for the year was $316,000. KM uses a perpetual inventory system. What is cost of goods available for sale, assuming CBC uses the gross method?
Explanation / Answer
Calculation of Cost of Goods sold :
if perpetual inventory system is used:
Opening inventory of merchandise = 52000
*Cost of Purcahses = 285000
Cost of goods sold = 337000
*Cost of Purcahse (if Gross method is used)
Purcahse Cost = $ 280000
+ Freight charges = $ 9000
- Returned Goods = $ 4000
= $ 285000
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