Question

The following information was derived from the 2014 accounting records of Perez Co.:

Perez's Goods
Perez's Central Warehouse Held by Consignees
Beginning inventory $130,000 $ 14,000
Purchases 525,000 70,000
Freight-in 10,000
Transportation to consignees 5,000
Freight-out 30,000 8,000
Ending inventory 145,000 20,000


Perez's 2014 cost of sales was?

Answer 1

The cost of sales for Perez Co. in 2014 is calculated by adding beginning inventory, purchases, freight-in, and transportation to consignees, then subtracting the ending inventory. The final cost of sales is $519,000.

Step-by-step explanation:

To calculate the cost of sales for Perez Co. in 2014, we will first add up the beginning inventory value and all additional costs and then subtract the ending inventory value. This includes beginning inventory, purchases, freight-in, and transportation to consignees, but excludes freight-out as it is not part of inventory costs:

• Beginning Inventory (Central Warehouse + Held by Consignees): $130,000 + $14,000 = $144,000
• Purchases: $525,000
• Freight-in: $10,000
• Transportation to Consignees: $5,000
• Ending Inventory (Central Warehouse + Held by Consignees): $145,000 + $20,000 = $165,000

Now, we subtract the ending inventory from the sum of the beginning inventory, purchases, freight-in, and transportation to consignees to get the cost of sales:

Cost of Sales = ($144,000 + $525,000 + $10,000 + $5,000) - $165,000
Cost of Sales = $684,000 - $165,000
Cost of Sales = $519,000