Category: Business and Money > Accounting
Asked by: donsilk-ga
List Price: $10.00
09 Mar 2006 12:27 PST
Expires: 08 Apr 2006 13:27 PDT
Question ID: 705442
1. Given the following information: Sales......120,000 Sales return.... ? Sales Discounts...4,000 Net sales.........110,000 Inventory, Jan. 1 ........ ? Purchases........60,000 Purchase returns.... ? Purchase discounts.........3000 Net Purchases..........52,000 Transportation In....... ? Cost of merchandise purchase....55,000 Merchandise available for sale....70,000 Inventory, Dec 31........? Cost of goods sold........? Dross Profit............62,000 What is the cost of goods sold ?
Answered By: livioflores-ga on 10 Mar 2006 20:52 PST
HI!! Since the item "Dross Profit" have nonsense inthe statement of the problem I will assume that there is a typo and the correct item is "Gross Profit". Read the following definitions from "Ameritrade's site - Education Center section -- Analyzing Company Reports: Understanding Income Statements -- Gross Profit on Sales page": "Gross profit on sales (also called gross margin) is the difference between all the revenue the company earns and the sales of its products minus the cost of what it took to produce them... ... Net sales are the total revenue generated from the sale of all the company's products or services minus an allowance for returns, rebates, etc. ... ... Cost of goods sold is what the company spent to make the things it sold. Cost of goods sold includes the money the company spent to buy the raw materials needed to produce its products, the money it spent on manufacturing its products and labor costs..." http://www.ameritrade.com/educationv2/fhtml/learning/uincomestates.fhtml#gross -------------------- NOTE: to see the framed version of this page visit the page "Ameritrade Education Center": http://www.ameritrade.com/educationv2/ameritrade_framed.html Then click on the "Learning to Invest" link and select the "Analyzing Company Reports" section and click to see the "Understanding Income Statements" page. --------------------- From the above definitions you have that (the formula also appears at the mentioned page): Gross Profit = Net Sales - Cost of Goods Sold From here we have that: Cost of Goods Sold = Net Sales - Gross Profit Then, according to the question statement: Cost of Goods Sold = $110,000 - $62,000 = $48,000 If you have the inventory data you can use different methods to determine the Cost of Goods Sold, see the following pages for additional references: "Inventories and Cost of Goods Sold": http://homepages.cambrianc.on.ca/tutorial/thetutorialcentre/accounting/inventories_and_cost_of_goods_so.htm "Accounting for Inventories": http://accountinginfo.com/study/inventory/inventory-120.htm See also the following articles at Wikipedia: "Cost of goods sold": http://en.wikipedia.org/wiki/Cost_of_goods_sold "Gross profit": http://en.wikipedia.org/wiki/Gross_profit Search strategy: "Cost of goods sold" "gross profit" "Cost of goods sold" inventory "Cost of goods sold" calculation I hope this helps you. Feel free to use the clarification feature if you need it; i will be glad to offer you further assistance on this question if you request for it. Best regards, livioflores-ga
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