Question

ABC Company sold goods with a total selling price of $20 during the year. It purchased goods for $5 and had beginning inventory of $3. A count of its ending inventory determined that goods on hand was $5. What is cost of goods available for sale? What is cost of goods sold? What was its gross profit

Answer 1

Answer: The cost of goods available for sale is $8, the cost of goods sold is $3, and the gross profit is $17.

Explanation:

To find the cost of goods available for sale, we need to add the beginning inventory and the purchases:

Cost of goods available for sale = Beginning inventory + Purchases

Given that the beginning inventory is $3 and the purchases are $5, we can calculate:

Cost of goods available for sale = $3 + $5 = $8

The cost of goods sold can be determined by subtracting the ending inventory from the cost of goods available for sale:

Cost of goods sold = Cost of goods available for sale - Ending inventory

Given that the cost of goods available for sale is $8 and the ending inventory is $5, we can calculate:

Cost of goods sold = $8 - $5 = $3

To find the gross profit, we subtract the cost of goods sold from the total selling price:

Gross profit = Total selling price - Cost of goods sold

Given that the total selling price is $20 and the cost of goods sold is $3, we can calculate:

Gross profit = $20 - $3 = $17