Question

Oriole Co. purchased goods with a list price of $181,400, subject to trade discounts of 20% and 10%, with no cash discounts allowable. How much should Oriole Co. record as the cost of these goods

Answer 1

$130,608

Explanation:

To calculate the cost of goods sold per the above information, we need to calculate first the portion of the trade discount on the goods purchased.

Trade discount = Goods purchased × 20% trade discount

= $181,400 × 20%

= $36,280

The next step is to calculate Sales and Gross profit

Sales = [$181,400 - $36,280] = $145,120

Gross profit = $145,120 × 10% = $14,512

Therefore,

Cost of goods sold = Sales - Gross profit

Cost of goods sold =$145,120 - $14,512

Cost of goods sold = $130,608

Hence, Oriole Co. would record $130,608 as cost of goods sold.