Question

During year 2, Hadley Company sold merchandise costing $12,000 for $44,100. Customers returned 13% of the merchandise and a 1% cash discount was provided on $16,700 of the sales. Based on this information, the cost of goods sold is $_________.

Answer 1

After adjusting for the merchandise returns and the cash discount on sales, the cost of goods sold for Hadley Company remains unchanged at $12,000, as these factors only affect the sales revenue, not the actual cost of the merchandise.

Step-by-step explanation:

To calculate the cost of goods sold (COGS) for Hadley Company, we need to adjust the cost of the merchandise sold for the returns and any discount given. The initial cost of merchandise sold by Hadley Company is $12,000. However, 13% of the merchandise, which corresponds to $44,100 (total sales) was returned. We need to calculate 13% of $44,100 and subtract this value from the total sales to determine the sales value after returns. Then, we subtract the 1% cash discount provided on $16,700 of the sales from this adjusted sales value.

Let's calculate the value of the returned merchandise:

• Returns = 13% of $44,100 = 0.13 x $44,100 = $5,733

Now we can calculate the sales after returns:

• Sales after returns = Total Sales - Returns = $44,100 - $5,733 = $38,367

Next, we calculate the cash discount:

• Cash Discount = 1% of $16,700 = 0.01 x $16,700 = $167

Since the reduction due to returns and discounts does not affect the actual cost of the merchandise, the COGS remains the same as the initial cost, which is $12,000. The returns and discounts only affect the sales revenue and not the cost. Therefore, the cost of goods sold is $12,000.