To solve the question, we'll need to calculate the Cost of Goods Sold (COGS) using the provided data. COGS is the cumulative cost of acquiring the goods that were sold during a certain period. In simpler terms, it is the cost of the inventory that the business has sold to customers. The formula to determine this is;
COGS = Beginning Inventory + Net Purchases - Ending Inventory.
So, let's break the steps down:
1. We start with the Beginning Inventory. This is the value of all the goods that X Mart had at the beginning of the year before any new purchases were made. In our case, it was 5,000.
2. We then consider Net Purchases, the value of all the new inventory that the business purchased throughout the year. In X Mart's case, it made 20,000 in net purchases.
3. We then add the Beginning Inventory to the Net Purchases to get the total cost of all the goods that were available for selling during the year. That means 5,000 + 20,000 = 25,000.
4. Finally, we subtract the Ending Inventory which was 9,000 from this total. The Ending Inventory is the value of all the goods remaining unsold at the end of the year. Subtracting gives us the cost of all the goods that were sold.
5. So, 25,000 - 9,000 = 16,000.
Therefore, the Cost of Goods Sold for X Mart is 16,000.