Question

1) What is cost of goods sold given the five transactions below? (Beginning balance inventory = 5,000).
Your Company purchased $50,000 of inventory on account , terms 2/10 ,n30.

Your Company purchased inventory under FOB shipping point Shipping cost $500.

Your Company returned $10,000 of the inventory before paying its bill .

Your Company paid the amount owed in the first transaction on day 8.

Your company sold all of its inventory for $65,000 on account terms 2/10,n30 .

a. $44,500

B. $44,700

C. $44,200

D. $39.700

E. $45,000

Answer 1

LET'S UNDERSTAND IT BY JOURNAL ENTRIES OF EACH TRANSECTION
1. Merchandise inventory Dr. $50000
To Accounts payable $50000

2. Merchandise inventory Dr. $500
To cash $500
( being shiping chages paid )

3. Accounts payable Dr. $10000
To Merchandise inventory $10000

4. Accounts payble Dr. $50000
To cash $39200
To Merchandise inventory $800

5. Accounts receivalbe Dr. $65000
To sale $65000

COST OF GOODS SOLD Dr. $44700
(39200+500+5000)
To MERCHANDISE INVENTORY $44700

HENCE, THE ANSWER WOULD BE OPTION B (e.i $44700)