Question

M Wholesale Company began the year with merchandise inventory of \(5,000. During the year, M purchased \)93,000 of goods and returned \(6,600 due to damage. M also paid freight charges of \)1,200 on inventory purchases. At year-end, M’s ending merchandise inventory balance stood at $17,200. Assume that M uses the periodic inventory system. Compute M’s cost of goods sold for the year.

Short answer

Answer

The cost of goods sold is$75,400.

Step-by-step solution

Meaning of Cost of Goods Sold

In accounting, the cost of goods sold denotes the amount of money a business spends to sell its goods. It includes thecost of inventories available, inventories purchases during the year, and excludes the inventory left at the end of the period.

Computation of cost of goods sold

Particulars	Amounts ($)
Opening inventory	5,000
Add: Purchases	93,000
Less: Goods returned	(6,600)
Add: Freight charges	1,200
Less: Closing inventory	17,200
Cost of goods sold	75,400