Answer:
The correct answer is:
$30,000
Explanation:
ending inventory = $20,000
sales = $75,000
Manufactured goods = $65,000
Beginning inventory = ???
1. First let us calculate the difference between the cost of goods sold and the cost of goods manufactured, in order to determine the goods from alternative sources order than manufacturing. This is done as follows:
Goods from sources other than manufacturing = (sales) - (manufactured goods)
Goods from sources other than manufacturing = 75,000 - 65,000 = $10,000
This means that out of the $75,000 worth of goods sold, $10,000 was from a source other than manufacturing which can be accurately predicted to be the beginning inventory
2. Next, to calculate the total beginning inventory, we will add the goods sold from the beginning inventory and the ending inventory.
Beginning inventory = (Goods from sources other than manufacturing ) + ending inventory
Beginning inventory = 10,000 + 20,000 = $30,000
<em>Note, since the sales are more than the manufactured goods, the excess is from beginning inventory</em>
