Question

The following is from Goldman Inc.'s 2016 income statement.

Purchases $172,000
Transportation-In $11,000
Inventory, January 1, 2016 $26,500
Inventory, December 31, 2016 $28,800
Purchase Returns and Allowances $8,400
How much will Goldman report as cost of goods purchased in its 2016 income statement?

a. $183,000
b. $174,600
c. $180,400
d. None of these choices

Answer 1

Goldman Inc. will report b) $174,600 as the cost of goods purchased on its 2016 income statement, which is calculated by adjusting purchases for transportation-in, purchase returns and allowances, and the change in inventory.

Step-by-step explanation:

To calculate Goldman Inc.'s cost of goods purchased for 2016, we need to consider the purchases, transportation-in, purchase returns and allowances, and the change in inventory. The formula to calculate this is:

Purchases + Transportation-In - Purchase Returns and Allowances + (Inventory at the beginning of the year - Inventory at the end of the year) = Cost of Goods Purchased.

Substituting the given values from Goldman Inc.'s income statement, we have:

$172,000 (Purchases) + $11,000 (Transportation-In) - $8,400 (Purchase Returns and Allowances) + ($26,500 - $28,800) (Change in Inventory) = Cost of Goods Purchased

$172,000 + $11,000 - $8,400 + ($26,500 - $28,800) = $174,600

Therefore, Goldman Inc. will report $174,600 as the cost of goods purchased on its 2016 income statement.