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24 September, 23:06

Audio Corporation purchased $20,000 of DVDs during the current year. The company had DVD inventory of $15,000 at the beginning of the year. An end of the year audit revealed that the company had DVD inventory of $10,000. What amount would be reported as cost of goods sold in the income statement for the current year.

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  1. 25 September, 02:56
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    The answer is: $25000

    Explanation:

    The cost of goods sold is determined by deducting the closing inventory balance from the opening inventory balance and the inventory purchased during the current period. Audio Corporation had $15,000 as the opening balance of its DVDs inventory account, $20,000 of inventory was purchased during the year and at year end, the DVD inventory was less $25,000 worth of DVDs.

    The cost of goods sold is therefore calculated as follows:

    Opening balance: $15,000

    Purchases: $20,000

    Finished goods: ($25,000)

    Closing balance: $10,000

    $25,000 would be reported as cost of goods sold, assuming DVDs are the only goods that Audio Corporation sells.
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