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15 June, 22:40

Bill Rose owns Rose Sporting Goods. At the beginning of the year, Rose Sporting Goods had $2,600 in inventory. During the year, Rose Sporting Goods purchased inventory that cost $13,200. At the end of the year, inventory on hand amounted to $3,800.

Required:

a. Cost of goods available for sale during the year.

b. Cost of goods sold for the year.

c. Amount of inventory would Rose Sporting Goods report on the year-end balance sheet.

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Answers (1)
  1. 16 June, 01:55
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    a. $15,800

    b. $12,000

    c. $3,800

    Explanation:

    The movement in the balance of inventory at the start and end of a period is as a result of sales and purchases. While sales reduces the balance in inventory, purchases increases the balance. This may be expressed mathematically as

    Opening balance + purchases - cost of goods sold = closing balance

    The opening balance added to the purchases gives the amount of goods available for sale.

    Cost of goods available for sale during the year

    = $2,600 + $13,200

    = $15,800

    $2,600 + $13,200 - cost of goods sold = $3,800

    Cost of goods sold = $2,600 + $13,200 - $3,800

    = $12,000

    The ending inventory balance is reflected in the balance sheet.
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