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 ?

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Request for Question Clarification by livioflores-ga on 10 Mar 2006 06:40 PST

Hi!!

Could the last item be GROSS profit instead DROSS profit??

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