Question

Dave's Duds reported cost of goods sold of $2,000,000 this year. The inventory account increased by $200,000 during the year to an ending balance of $400,000. What was the cost of merchandise that Dave's purchased during the year? a. $2,200,000 b. $2,400,000 c. $1,800,000 d. $1,600,000

Answer 1

Answer:

a. $2,200,000

Explanation:

We solve considering the inventory identity:

$Beginning Inventory + Purchase = Ending Inventory + COGS$

$Purchase = (Ending Inventory - Beginning Inventory) + COGS$

the difference during the year means the difference between ending and beginning inventory was of 200,000

So we plug that into the formula and solve

$Purchase = +200,000 + 2,000,000$

Purchase 2,200,000