Question

Calculate the cost of goods sold for a merchandiser using the periodic inventory system from the following details.

Purchases $500,000
Beginning Merchandise Inventory 175,000
Purchase Returns and Allowances 60,000
Purchase Discounts 12,000
Freight In 17,000
Ending Merchandise Inventory 160,000
A. $477,000
B. $460,000
C. $780,000
D. $500,000

Answer 1

B. $460,000

Step-by-step explanation:

The computation of the cost of goods sold using the periodic inventory system is shown below:

Beginning Inventory $175,000

Add: Purchases $500,000

Add: Freight In $17,000

Less: Purchase Returns and allowances -$60,000

Less: Purchase Discounts -$12,000

Cost of goods available for sale $620,000

Less: Ending Inventory -$160,000

Cost of goods sold $460,000

We simply applied the above format to determine the cost of goods sold