Question

Bright Pots and Pans had a beginning inventory of $240,000 at cost. During the month, Bright purchased and received $150,000 in goods and had net sales of $280,000. Throughout the month, Bright maintained a 50% markup on all sales. Compute the cost of goods sold

Answer 1

Cost of goods sold = Opening inventory + Purchases - Closing inventory (Or) Sale - Profit mark up

Q1) In the given problem, closing inventory details are not available. So we go by calculating cost of goods sold =S 280,000 - Markup (0.50*280,000) = 140,000.

Q3) Similar to Q1, cost of goods sold = 50,000 - (0.30*50,000) = 35,000.

Q4) Closing inventory details are available in this problem. So cost of goods sold = Opening inventory 30,000 + Purchases 150,000 - Closing inventory at cost 40,000 = 140,000.

Q2) Calculating book value at end of Y1 when depreciation based on number of units produced:-

Depreciation = ( Cost - Scrap Value) ÷ Total estimated production during the life of asset * Assets produced during the year

= (22,500 - 2,500) ÷ 800,000 * 150,000

= 3,750

Book value at end of Y1 = Cost of purchase - Depreciation ( as computed above) = 22,500 - 3,750 = 18,750.