Question

and Manufacturing Business.
Shown here are annual financial data at December 31, 2017, taken from two different companies.
Music World Retail Wave-Board Manufacturing Beginning inventory Merchandise $200,000Pinished goods $500,000 Cost of purchases 300,000Cost of goods manufactured 875,000 Ending inventory Merchandise 175,000Finished goods 225,000
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.

Answer 1

Answer: (a) $325,000

(b) $1,150,000

Explanation:

(a) For Music world retail:

Cost of goods sold = Goods available for sale - Ending merchandise inventory

                                = (Beginning merchandise inventory + Cost of purchases) - Ending merchandise inventory

                                = ($200,000 + $300,000) - $175,000

                                = $500,000 - $175,000

                                = $325,000

(b) For Wave-Board Manufacturing:

Cost of goods sold = Goods available for sale - Ending finished goods inventory

                               = (Beginning finished goods inventory +  Cost of goods manufactured) - Ending finished goods inventory

                                = ($500,000 + $875,000) - $225,000

                                = $1,150,000