Question

the following transactions pertain to 2019, the first year operatins of Kendall company. all inventories was started and completed during 2019. Assume that all transactions are cash transactions

1. acquired $105,000 casg by issuing common stock

2. paid $45,000 for manufacruring equipment and 5 year useful life

3. paid $9,400 for materials used to produce inventory.

4. paid $8,500 to production workers

5. paid $4,400 for administrative office furniture, it had $1,000 salvage value and 5 year useful life

6. paid $13,000 to administrative employees salaries

7. PRODUCED 9,000 units of inventory of which 7,000 units were sold at price of $7.00 each.

Calculate cost of goods sold.

Answer 1

Cost of goods sold is calculated as follows:

Production Cost Per Unit = $9,400 + $8,500 + ($45,000 / 5 Years) / 9,000 units

= $9,400 + $8,500 + $9,000 /  9,000 units

= $2.99 Per Unit

Ending Inventory finished goods = (9,000 units - 7,000 units) * $2.99 Per Unit

= $5,980

Cost of goods sold =

Materials used to produce inventory + Production workers + Depreciation on Manufacturing equipment - Ending Inventory finished goods

= $9,400 + $8,500 + ($45,000 / 5 Years) - $5,980

=( $9,400 + $8,500 + $9,000) - $5,980

= $20,920

Cost of goods sold = $20,920