the following information what is the cost of the merchandise sold course

The calculation of the cost of merchandise sold is to add the beginning inventory balance to merchandise purchases during the period, and subtract out the ending inventory balance. Thus, the calculation is: Beginning merchandise inventory + Merchandise purchases - Ending merchandise inventory

Full Answer

What is the cost of merchandise purchased?

The cost of merchandise purchased is equal to $9,070. A company, using the periodic inventory system, has merchandise inventory costing $175 on hand at the beginning of the period. During the period, merchandise costing $635 is purchased. At year-end, merchandise inventory costing $160 is on hand.

What is a Normal Merchandise account?

Merchandise held for sale in the normal course of business. A company using the periodic inventory system has the following account balances: Merchandise Inventory at the beginning of the year, $3,600; Freight-In, $650; Purchases, $10,700; Purchases Returns and Allowances, $1,950; Purchases Discounts, $330.

How much does periodic inventory cost a company?

A company using the periodic inventory system has the following account balances: Merchandise Inventory at the beginning of the year, $3,600; Freight-In, $650; Purchases, $10,700; Purchases Returns and Allowances, $1,950; Purchases Discounts, $330. The cost of merchandise purchased is equal to $9,070.

How much inventory is on hand at the beginning of period?

$9,070. A company, using the periodic inventory system, has merchandise inventory costing $175 on hand at the beginning of the period. During the period, merchandise costing $635 is purchased.

How do you calculate cost of merchandise sold?

At a basic level, the cost of goods sold formula is: Starting inventory + purchases − ending inventory = cost of goods sold.

What type of account is cost of merchandise sold?

expenseCost of goods sold is considered an expense in accounting and it can be found on a financial report called an income statement.

Is cost of merchandise sold a debit or credit?

Cost of goods sold is an expense account, so it is increased by a debit entry and decreased by a credit entry. When making a journal entry, COGS is debited and purchases and inventory accounts are credited to balance the entry.

What is the cost of goods sold on an income statement?

The cost of goods sold (GOGS) is the sum of all direct cost associated with making a product. It appears on an income statement and typically includes money spent on raw materials and labour. It does not include coss associated with marketing, sales or distribution.

Is inventory cost of goods sold?

The Difference Between Inventory and Cost of Goods Sold Inventory includes all of the raw materials, work-in-progress, and finished goods that a company has on hand. COGS only includes the direct costs associated with the production of the goods that were sold.

What is the method of accounting for inventory in which the cost of goods sold is recorded each time a sale is made?

Key Takeaways. The periodic inventory system uses an occasional physical count to measure the level of inventory and the cost of goods sold. The perpetual system keeps track of inventory balances continuously, with updates made automatically whenever a product is received or sold.

Why is cost of goods sold a debit?

As the cost of goods sold is a debit account, debiting it will increase the cost of goods sold and reduce the company's profits. The inventory account is of a debit nature, and crediting it will decrease the value of closing inventory. The cost of goods sold is also increased by incurring costs on direct labor.

What are cost of goods sold on a balance sheet?

Key Takeaways. Cost of goods sold (COGS) includes all of the costs and expenses directly related to the production of goods. COGS excludes indirect costs such as overhead and sales & marketing. COGS is deducted from revenues (sales) in order to calculate gross profit and gross margin.

Is the cost of the merchandise sold?

What is the Cost of Merchandise Sold? The cost of merchandise sold is the cost of goods that have been sold by a wholesaler or retailer. These entities do not manufacture their own goods, instead buying the goods from third parties and selling them to their customers.

What type of account is the cost of goods sold account quizlet?

1. Cost of goods sold is a type of expense. Sales Discounts and Sales Returns and Allowances have normal credit balances.

What type of account is merchandise inventory?

current assetWhat type of account is merchandise inventory? Merchandise inventory is an asset account. Merchandise inventory is reported as a current asset on a retailer's balance sheet. A current asset is one that will provide an economic benefit during a given accounting period, typically a year.

What is cost of sales in accounting?

The cost of sales is the accumulated total of all costs used to create a product or service, which has been sold. The cost of sales is a key part of the performance metrics of a company, since it measures the ability of an entity to design, source, and manufacture goods at a reasonable cost.

What is Gross Profit?

Gross Profit is the difference between Revenue and Cost of Merchandise Sold. It shows how much a company has to spend to purchase the products compared to the selling price of the product.

What is Net Income?

In a business, Net Income is the difference between Revenue and Expenses. When the difference is positive (revenues are greater than expenses), the business has a profit or Net Income. When the difference is negative (expenses are greater than revenues), the business has a loss or Net Loss.

What is the Difference Between Gross Profit and Net Income?

Gross Profit is the difference between what a product or service is sold for (selling price or Revenue) and what it costs the company to make or purchase products for sale to customers ( Cost of Good Sold .) Net Income is the difference between Gross Profit and the Operating Expenses of a business.

What Does Net Income Mean?

When a company has Net Income, it means the company is operating at a profit (revenue is greater than expenses.) When a company has a Net Loss, it means the company is operating at a loss (expenses are greater than revenue.)

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