Question

The following information is available for the Tenor Music Store for the fiscal year ended December:

Ending Inventory	$100,100
Transportation-in cost	8,900
Purchase discounts	15,000
Beginning inventory	79,000
Merchandise Cost	450,000
Purchase returns and allowances	6,200
Sales revenue	800,000
Sales discount	12,500

Required:

A) Prepare a cost of goods sold statement for Tenor Music Store.

B) Compute the gross margin for the fiscal year ended December 31.

Answer 1

Solution A:

Statement of Cost of Goods Sold
Particulars	Details	Amount
Opening inventory		$79,000.00
Purchase Cost:
Merchandise Cost	450000
Less: Purchase Discount	15000
Less: Purchase Returns	6200
Add: Transport In Cost	8900	$437,700.00
Less: Ending Inventory		$100,100.00
Cost of Goods Sold		$416,600.00

Solution B:

Net Sales Revenue = Sales Revenue - Sales Discount = $800,000 - $12,500 = $787,500

Gross Margin = Net Sales - Cost of Goods Sold = $787,500 - $416,600 = $370,900