Question

A company's cost of goods sold was $8,000. determine net purchases and ending inventory given goods available for sale were $22,000 and beginning inventory was $10,000.

A. Net Purchases: $30,000; ending inventory: $14,000

B. Net Purchases: $18,000; ending inventory: $12,000

C. Net Purchases: $20,000; ending inventory: $30,000

D. Net Purchases: $12,000; ending inventory: $14,000

E. Net Purchases: $32,000; ending inventory: $40,000

Answer 1

To find the net purchases of the company, subtract the beginning inventory from goods available for sale, yielding $12,000. To calculate the ending inventory, subtract the cost of goods sold from the sum of the beginning inventory and net purchases, ending with a figure of $14,000. The correct option is B. Net Purchases: $18,000; ending inventory: $12,000.

Step-by-step explanation:

To determine the net purchases and ending inventory for the company, we need to understand and use the formula for calculating the cost of goods sold (COGS). The formula is as follows:

COGS = Beginning Inventory + Net Purchases - Ending Inventory.

In this particular problem, we are given:

• Cost of Goods Sold: $8,000
• Beginning Inventory: $10,000
• Goods Available for Sale: $22,000

To find the Goods Available for Sale, we add the Beginning Inventory to Net Purchases:

Goods Available for Sale = Beginning Inventory + Net Purchases

Therefore, to find out the Net Purchases, we rearrange the formula to solve for it:

Net Purchases = Goods Available for Sale - Beginning Inventory = $22,000 - $10,000 = $12,000.

Now, since we have Net Purchases, we can calculate the Ending Inventory with:

Ending Inventory = Beginning Inventory + Net Purchases - COGS = $10,000 + $12,000 - $8,000 = $14,000.

The correct answer is Net Purchases: $12,000; Ending Inventory: $14,000, which corresponds to option D.