Question

Hubb Inc. is a merchandising company which uses the periodic inventory system. Based on the   

selected account balances below, determine Hubb's beginning inventory:

Net Income       $37,000

Sales Revenue                                                        175,000

    Purchases                                                                 90,000

    Inventory (ending)                                                   17,000

    Purchase Returns and Allowances                            3,000

    Transportation – in                                                    4,000

    Transportation – out                                                 6,000

    Sales Discounts                                                        8,000

    Sales Returns and Allowances                               5,000

    Operating Expenses                                                35,000

                      Purchase Discounts                                                   7,000

	A.	$23,000
	B.	$72,000
	C.	$84,000
	D.	$90,000
	E.	$17,000

Answer 1

Answer is $23,000

Net Income = Gross Profit - Operating Expenses
$37,000 = Gross Profit - $35,000
Gross Profit = $72,000

Net Sales = Sales Revenue - Sales Discounts - Sales Returns and Allowances
Net Sales = $175,000 - $8,000 - $5,000
Net Sales = $162,000

Net Purchases = Purchases + Transportation-in - Purchase Returns and Allowances - Purchase Discounts
Net Purchases = $90,000 + $4,000 - $3,000 - $7,000
Net Purchases = $84,000

Gross Profit = Net Sales - Cost of Goods Sold
$72,000 = $162,000 - Cost of Goods Sold
Cost of Goods Sold = $90,000

Cost of Goods Sold = Beginning Inventory + Net Purchases - Ending Inventory
$90,000 = Beginning Inventory + $84,000 - $17,000
Beginning Inventory = $23,000