Question

Gabel Inc. is a merchandising company. Last month the company's merchandise purchases totaled $63,000. The company's beginning merchandise inventory was $13,000 and its ending merchandise inventory was $15,000. What was the company's cost of goods sold for the month

Answer 1

Answer:

Gabel Inc.

The company's cost of goods sold for the month is:

$61,000

Explanation:

a) Data and Calculations:

Beginning inventory =     $13,000

Purchases                         63,000

Goods available for sale  76,000

less Ending inventory      15,000

Cost of goods sold        $61,000

b) A company's cost of goods sold is the difference between the cost of goods available for sale and its ending inventory of merchandise.  This implies that the company allocates the cost of goods available for sale (which is the function of the beginning inventory and the purchases made during the period) between the cost of goods sold and the cost of the ending inventory based on the inventory valuation method in use.