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?

A) $91,000
B) $63,000
C) $65,000
D) $61,000

Answer 1

To find the company's cost of goods sold (COGS), we need to calculate the net purchases, the cost of goods available for sale, and then subtract the ending inventory from the cost of goods available for sale. In this case, the COGS for the month was $61,000.

Step-by-step explanation:

To find the company's cost of goods sold (COGS), we need to calculate the net purchases. Net Purchases = Purchases - Purchases Returns and Allowances - Purchases Discounts. In this case, the total purchases were $63,000 and there were no purchases returns or allowances or purchases discounts mentioned, so the net purchases would be $63,000.

Next, we need to calculate the cost of goods available for sale. Cost of Goods Available for Sale = Beginning Inventory + Net Purchases. The beginning inventory was $13,000, so the cost of goods available for sale would be $13,000 + $63,000 = $76,000.

Finally, to find the COGS, we subtract the ending inventory from the cost of goods available for sale. COGS = Cost of Goods Available for Sale - Ending Inventory. The ending inventory was $15,000, so the COGS would be $76,000 - $15,000 = $61,000.