Determining the cost of inventory
Required
For each of the following cases determine the ending balance in the inventory account. (Hint: First, determine the total cost of inventory available for sale. Next, subtract the cost of the inventory sold to arrive at the ending balance.)
a. Kay’s Dress Shop had a beginning balance in its inventory account of $10,000. During the accounting period Kay’s purchased $34,000 of inventory, returned $2,000 of inventory, and obtained $320 of purchases discounts. Kay’s incurred $800 of transportation-in cost and $1,200 of transportation-out cost. Salaries of sales personnel amounted to $13,400. Administrative expenses amounted to $21,000. Cost of goods sold amounted to $33,200.
b. Sam’s Soap Shop had a beginning balance in its inventory account of $4,000. During the accounting period Sam’s purchased $18,600 of inventory, obtained $600 of purchases allowances, and received $180 of purchases discounts. Sales discounts amounted to $320. Sam’s incurred $450 of transportation-in cost and $130 of transportation-out cost. Selling and administrative cost amounted to $6,900. Cost of goods sold amounted to $17,000.
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