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14 April, 09:19

Shown here are annual financial data at December 31, 2017, taken from two different companies. Music World Retail Wave-Board Manufacturing Beginning inventory Merchandise $ 145,000 Finished goods $ 350,000 Cost of purchases 340,000 Cost of goods manufactured 590,000 Ending inventory Merchandise 120,000 Finished goods 170,000 Required: 1. Prepare the cost of goods sold section of the income statement at December 31, 2017, for each company in Merchandising Business and Manufacturing Business.

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  1. 14 April, 10:45
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    (a) Merchandising Business

    Music World Retail

    Income statement at December 31, 2017 (extract)

    Cost of Goods Sold

    Beginning inventory Merchandise 145,000

    Add Cost of purchases 340,000

    Less Ending inventory Merchandise (120,000)

    Cost of Goods Sold 365000

    (a) Manufacturing Business

    Wave-Board Manufacturing

    Income statement at December 31, 2017 (extract)

    Cost of Goods Sold

    Beginning Finished goods 350,000

    Add Cost of goods manufactured 590,000

    Less Finished goods (170,000)

    Cost of Goods Sold 770000

    Explanation:

    (a) Merchandising Business

    Music World Retail is in the Merchandising Business and its Cost of Sales will account for cost of merchandise purchased.

    (a) Manufacturing Business

    Wave-Board Manufacturing is in the Manufacturing Business and its Cost of Sales will account for cost of Finished Goods transferred from the Manufacturing Account
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