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Beginning inventory was $18,000, cost of goods manufactured for the year was $109,500 and ending inventory was $15,000. What is cost of goods sold?
A$127,500
B$112,500
C$109,500
D$142,500
Answer & Solution
Correct answer: B. $112,500
1. Cost of goods sold starts from the value of inventory on hand at the beginning of the period.
2. Beginning inventory is $18,000.
3. Add the cost of goods manufactured during the year, $109,500.
4. That gives the total cost of goods available for sale: $18,000 plus $109,500 equals $127,500.
5. Subtract the cost of inventory at the end of the period, $15,000.
6. $127,500 minus $15,000 equals $112,500, which is cost of goods sold.
7. Stopping at $127,500 reports goods available for sale rather than goods actually sold, and $142,500 adds the closing stock instead of subtracting it.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 14 "Using Financial Information and Accounting", section 14.5 The Income Statement_
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